Legal Grounds to Refuse Renewing a Protected Lease in the UK

When a non-protected commercial lease reaches the end term date, a commercial tenant will either have a legal right to renew it, or it will end. Business tenants must negotiate a new lease if they wish to remain in occupation. Contrarily, the commercial tenant has the legal right of automatic lease renewal under a protected lease. However, the commercial landlord does have some protection to allow them to refuse to renew a protected lease In the UK. Both parties must understand what this protection consists of to understand their rights in the commercial lease. This article will explain the legal grounds for a refusal to renew a protected lease in the UK.

Protected Lease  

A protected lease is a commercial lease with security of tenure. Specific provisions in UK property law apply to the security of tenure. The protection conferred by UK property law on the commercial tenant is quite generous. When the commercial tenant’s lease term ends, by law, the lease will automatically renew with the same terms and conditions. Therefore, the tenant can remain in occupation of the commercial premises.

Legal Grounds to Refuse Protected Lease Renewal

A protected lease is very beneficial to the commercial tenant as it offers them the protection of automatic lease renewal. However, commercial landlords may, in certain instances, refuse the tenant’s request for automatic lease renewal. Commercial landlords can utilise any of seven legal grounds to refuse the renewal of a protected lease. These seven grounds are the landlord’s protection in a protected lease. We explain these below. A landlord must serve a counter-notice within two months from the date a tenant requests new terms for the new tenancy arising from lease renewal. Alternatively, they can serve a hostile notice at the end of the lease term. 

Fault Grounds

Three grounds for a refusal to renew a protected lease in the UK are due to the commercial tenant being at fault in the commercial lease. These grounds typically activate when the commercial tenant has not adhered to their lease obligations. These are as follows:

1. The tenant does not maintain the property, causing it to be in a poor state. This ground basically means the tenant did not adhere to their repair obligations in the commercial lease. A court has the discretion to apply this ground.
2. If the commercial tenant has persistently been late in their rent payments in the commercial lease, a landlord can decide to refuse renewal. However, by law, there must have been repeats of late rent payments. Further, the landlord must show they were proactive in trying to gain payments.
3. A court can also decide to refuse lease renewal if a commercial tenant substantially breaches an obligation in the commercial lease.

Where a commercial landlord relies on one of the fault grounds, a commercial tenant will not get financial compensation at the end of the lease term.

Grounds with Statutory Compensation

There are three legal grounds for the landlord to refuse lease renewal which, if they rely on, they have to pay the commercial tenant financial compensation. The amount payable will depend on the value of the commercial property and their time as a tenant in occupation. The grounds are as follows:

1. The commercial landlord claims that they can make more money if they lease the whole property, which they only currently sublease part of to the tenant. This is a ground that landlords rarely use.
2. The ‘redevelopment’ ground is the most popular ground commercial landlords use to refuse lease renewal of a protected lease. However, it is also a very strict one to meet. So if a landlord only wants to redecorate or remove a partition wall, they will not meet this ground.
3. Where a commercial landlord wishes to move into the property for their business or as a resident, this is the ‘owner occupation’ ground. A landlord can only rely on this where they have owned the property for at least five years. 

Alternative accommodation 

A landlord can oppose the lease renewal of a protected lease because they offer their tenant alternative accommodation. However, this ground is the least used ground. Where a landlord does rely on it, they need to ensure the alternative accommodation is reasonable and suitable. The landlord also has to be able to offer it before they serve a counter notice to refuse renewal.

Cheat Sheet for Leasing Terms

This cheat sheet outlines what you should be aware of in your lease agreement.

Download Now

Key Takeaways

A protected commercial lease is a lease with the security of tenure. This means a commercial tenant has the legal right to automatic lease renewal at the end of the lease term. However, their landlord can refuse lease renewal on limited reasonable grounds. Seven legal grounds are available for a commercial landlord to rely on to deny the commercial tenant’s request for lease renewal. Commercial landlords can rely on the fault grounds when the commercial tenant’s behaviour contradicts their lease obligations. If a landlord wishes to rely on a ground with statutory compensation, the landlord must financially compensate the tenant. This may occur where the landlord wishes to move into the commercial property they own. Furthermore, landlords can deny their tenant’s lease renewal request if they can offer alternative accommodation. Although, the commercial landlord must ensure alternative accommodation is available before serving the counter-notice.

If you need help understanding the legal grounds for a refusal to renew a protected lease in the UK, contact our experienced leasing lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions