Table of Contents
A commercial lease is where a business owner occupies a property or part of one as their business premises. The property owner/landlord grants sole occupation for a given term (business tenancy) in return for rental payments. There are many legal procedures associated with commercial leases, and both landlords and tenants must ensure they follow them correctly. One procedure is when a landlord or tenant wishes to renew the commercial lease or terminate the existing lease. If the lease is a protected business tenancy, you can do this with a Section 25 Notice or a Section 26 Notice. This article will explain the key differences between the two notices.
Commercial Lease Agreement
A commercial lease agreement contains the terms and conditions of your commercial lease. It is a binding contract between you and your landlord and will detail terms, such as the rental amount and lease term.
Your commercial lease may have tenure security, meaning it is a protected lease. Where it does, a commercial tenant has a legal right to have a new tenancy when they reach the end of the lease term. However, you must follow a particular procedure when renewing or terminating these types of commercial leases, which includes Section 25 Notices and Section 26 Notices. Both can be complicated, so it is beneficial to seek legal advice when you need to use either notice.
This cheat sheet outlines what you should be aware of in your lease agreement.
Section 25 Notice
A Section 25 Notice arises from the corresponding section of the Landlord and Tenant Act 1954. It concerns what a landlord should do should they wish to terminate a commercial lease with security of tenure. It also concerns the process if a landlord wishes to renew the tenancy with a new one with different terms. Therefore there are two different forms of Section 25 Notice.
If a landlord wishes to terminate the tenancy and not renew it with a new one, they must serve their commercial tenant with a Section 25 Notice within 6–12 months of the date they wish it to end. However, if their tenant has already served a Section 26 Notice, they cannot serve a Section 25 Notice.
When a commercial tenant receives a Section 25 Notice, they should respond to the form. If they fail to respond, the tenancy will automatically end as per the date stated in the notice. Alternatively, it may continue on the terms the commercial landlord suggests. A tenant cannot respond with a Section 26 Notice.
If the tenant disagrees with the Section 25 Notice, they can dispute it in court. A court then decides the new tenancy and the terms of this.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
Section 26 Notice
Similar to a Section 25 Notice, a Section 26 Notice arises from the relevant section of the Landlord and Tenant Act 1954. A Section 26 Notice concerns commercial leases with security of tenure, where the lease term is due to end. If the tenant wishes to continue to occupy the property as their commercial premises but would like a new lease with new terms, they can serve a Section 26 Notice on their landlord. This preempts the Section 25 Notice. Likewise, a tenant can do this anywhere between 6–12 months before the lease terms end.
When a landlord receives a Section 26 Notice, they should respond within two months of receipt if they wish to oppose or accept it. This is a counter-notice. If they fail to respond in this timeframe, a tenant can begin legal proceedings to request a court to determine any new tenancy. However, as with any dispute, the tenant and landlord should try to resolve these between them in the first instance.
Key Differences
Below, we lay out the key differences between the two notices.
| Section 25 Notice | Section 26 Notice |
| For use by a commercial landlord | For use by a commercial tenant |
| Has two uses: to terminate a tenancy and to renew with new terms | Has one use: to suggest new terms for a new lease with the lease renewal by pre-empting the Section 25 Notice |
| Stems from Section 25 of the Landlord and Tenant Act 1954 | Stems from Section 26 of the Landlord and Tenant Act 1954 |
| Allows a tenant to respond but they must do so on the Section 25 form | Allows a landlord to respond within a timeframe if they dispute it but should specifically use a counter-notice |
| A landlord can suggest termination if one of the seven legal grounds is met | Not used for termination |
Key Takeaways
If you have a commercial lease with security of tenure, you will need to understand Section 25 Notices and Section 26 Notices, including their key differences. A Section 25 Notice is a legal process a commercial landlord uses to either terminate a tenancy or renew one with new lease terms. Alternatively, a tenant issues a Section 26 Notice to preempt the Section 25 Notice where they wish to renew with a new lease and suggest new terms.
Apart from the slightly different functions of these two notices, there are also other differences. For example, a tenant will respond to the Section 25 Notice on the Section 25 form, but a landlord will respond to a Section 26 Notice with a counter-notice within two months of receipt of the Section 26 Notice. Also, a landlord has only seven grounds on which to end the tenancy.
If you need help understanding the key differences between Section 25 and Section 26 notices in the UK, 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 for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A Section 25 notice is a legal notice a commercial landlord uses to terminate or renew a lease with new suggested terms.
A Section 26 Notice is a legal notice a commercial tenant uses to preempt the landlord’s Section 25 Notice when they wish to renew their tenancy with a new lease and suggest new terms.
We appreciate your feedback – your submission has been successfully received.
