What Actions Should Commercial Tenants Take if They Receive a Section 25 Notice?

When you lease a commercial property as a commercial tenant, you must understand many legal procedures and terms. Indeed, your commercial lease agreement is legally binding, so you must follow your obligations under it. Further, it is also essential to understand your rights. For instance, what if you receive a Section 25 Notice from your commercial landlord? If you do, you must act promptly and understand the implications. This article will explain what you should do if you are a commercial tenant and receive a Section 25 Notice.

What is a Commercial Lease? 

In a commercial lease, you occupy a commercial property in return for rent. The property will be your business premises, and your landlord will permit you to conduct specified business activities. Your commercial lease will have a lease end date, which is when you will occupy the commercial property. 

Your commercial lease agreement contains the details of your commercial lease, which includes the rights and responsibilities of you and your commercial landlord. For example, it will have:

• your rental amount;
• the lease term end date;
• both your repair obligations; and
• alienation clauses.

What is a Section 25 Notice?   

A section 25 notice will only be relevant to you as a commercial tenant if your commercial lease does not contract out of a specific part of the Landlord and Tenant Act 1954 (the Act). If you do not contract out of this part of the Act, you have security of tenure. This means you have a legal right to renew your commercial lease when it ends the lease term. 

When you have the benefit of the Act, there are procedures that the landlord must follow if it wishes to oppose the lease renewal, or propose new terms for that lease, which is the issue of a Section 25 Notice. This gets its name from the relevant section of the Act. Your commercial landlord may use a Section 25 Notice if they either wish to:

• oppose the renewal of your tenancy on one of the limited legal grounds to do so; or
• renew the tenancy but suggest new terms.

What Actions Should I Take?  

If, as a commercial tenant, you receive a Section 25 Notice, you should know what to do. First, you should receive a Section 25 Notice on a specific legal form, including detailed notes explaining the form to you. A landlord cannot serve a Section 25 Notice on you if they already have a Section 26 Notice from you. In this section of the article, we take you through some steps to take if you receive a Section 25 Notice.

Competent Landlord

Only a competent landlord can legally serve a Section 25 Notice. This refers to the party that is legally entitled to service the notice and in some cases may not be the party you generally see as your ‘landlord’. Therefore, if you receive a Section 25 Notice, the first step is to assure yourself that a competent landlord gave it to you. It would help if you got legal advice as your landlord could change during your renewal process. 

Check the Form

As there are strict legal rules around Section 25 forms, you should ensure that the form is given to you correctly. This can include you checking:

• the date the tenancy will end is correctly on the form;
• that you receive the notice within the legal timeframe, which is no more than 12 months and no less than 6 before the lease end date;
• the property address on the form relates to your commercial premises; and
• what actions the landlord wishes to take through the form, whether it is opposing the renewal, or suggesting new terms for renewal.

Negotiate

If the Section 25 Notice proposes the terms for the renewal lease, the initial step is to negotiate with your commercial landlord on the terms they suggest. You can get the assistance of a qualified surveyor who can check terms such as rental price. You can come to an agreement with your landlord or decide to accept their terms.

Make a Court Application

Suppose you cannot agree the terms of the renewal lease with the landlord or the landlord has opposed renewal. In this case, you must respond to the Section 25 Notice within the expiry date it states by applying to the local county court. You must do so to avoid losing the protection under the Act, and your lease will end. Further, you will give the landlord the right to re-take possession of the property.

Once you make the court application, your tenancy becomes a “continuation tenancy” until three months after the court decides what to do with the commercial lease. Also, before the court decides, your landlord can apply for “interim rent” from you. If your landlord correctly stipulates one of the limited legal grounds to end the lease, the court may rule in favour of termination. If the court wins, they will grant you a new tenancy and decide the terms.

Key Takeaways

A Section 25 Notice is a legal notice a landlord can serve you with when you have a commercial lease with the security of tenure, but the landlord either wishes to oppose a renewal of the lease or set out the terms of that new lease. If you receive a Section 25 Notice, there are several things you should do. One of these, for example, is to check it is correct and refers to your commercial lease. If it does and refers to a change of lease terms, you may appoint a surveyor to check these and negotiate them. For example, if the form opposes renewal, you must make a court application within the expiry date, or you could lose the protection of a lease with the security of tenure.

If you need help understanding your rights and obligations as a commercial tenant, our experienced leasing lawyers can assist 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. So call us today on 0808 196 8584 or visit our membership page.

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