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As a business owner, you may find yourself in a position where you want to end your lease with your commercial landlord. For example, your business revenue may change, and you can no longer afford the rent for your lease agreement. Alternatively, you may require a larger property as your business expands. To end or renew your lease, you typically issue a Section 26 Notice to your landlord. This article explores Section 26 Notices in detail.
What is a Section 26 Notice?
A Section 26 Notice takes its name from the relevant section of property law. It is a notice that you, as a tenant, use to renew or end your commercial tenancy lawfully. Although your landlord can do the same thing with a Section 25 Notice, you may wish to begin the process with a Section 26 Notice.
If you use a Section 26 Notice, you must serve the notice to your landlord between 6 and 12 months before your tenancy ends, following the correct legal process. This means you must include the details of any new terms for the new lease. You will also need to specify:
- the lease term you propose;
- the rent amount; and
- whether you wish to have a break clause in the lease agreement.
What is a Security of Tenure?
The first point you should note about Section 26 Notices is whether they apply to your type of commercial lease agreement for your business premises. This is because the notice is only relevant to leases with security of tenure.
A commercial lease with security of tenure is a protected lease. As such, you have the right to a new tenancy when you reach your lease term end. If your lease agreement does not provide for security of tenure, it will typically have an opt-out clause. In this case, a Section 26 notice is not how you end or renew your tenancy; details on how to do so should be in your lease agreement.
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What are My Landlord’s Rights?
Your commercial landlord must respond to your Section 26 Notice to renew your lease within two months of receipt. However, your landlord does have rights when they receive a Section 26 Notice from you as their commercial tenant. They can refuse renewal of your commercial tenancy with a counter-notice but only on seven limited grounds, namely:
- you regularly fail to pay your rent;
- they want to develop the property;
- you have kept the premises in disrepair;
- you have breached the lease in other ways;
- your landlord offers you other accommodation which is suitable for your business;
- you sublet without permission; and
- your landlord wishes to occupy your business premises.
If your landlord opposes renewal and you disagree, you may be able to take them to court. This requires you to apply for your new tenancy with the court. Where this occurs, your tenancy rent will stay the same until three months after the court proceedings.
What is a Section 25 Notice?
In addition, there are times when issuing a Section 26 Notice is inappropriate, for example, where your lease does not have security of tenure. In these circumstances, you must use a Section 25 Notice instead. A Section 25 Notice is the equivalent of a Section 26 Notice but is usually for your landlord’s use.
You should use a Section 25 Notice if your landlord has already sent you one in connection with your lease renewal. Likewise, you use it to respond to your landlord instead of sending a Section 26 Notice.
Key Takeaways
If you have a protected tenancy, you may issue your commercial landlord a Section 26 Notice. This allows you to inform your commercial landlord that you wish to renew or end your lease within 6 to 12 months of it ending. If you want to renew your lease, you may request new terms. If your landlord refuses these, you have the right to the same terms as your current lease except for any fair changes to rent. Your landlord has two months to respond to your notice and explain why they oppose renewal. There are only seven legal grounds to oppose renewal, and you can take any renewal disagreement to court.
Additionally, ensure that your lease agreement includes security of tenure, as Section 26 Notices are only applicable to leases with this protection. If your lease does not provide security of tenure, a Section 25 Notice may be required instead, particularly if your landlord initiates the renewal process.
If you need help understanding 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 26 Notice is the notice you use as a commercial tenant to let your landlord know you wish to renew or end your existing lease. It is only relevant where your lease has security of tenure, meaning it is a protected lease.
As a commercial tenant, you do not have to serve a Section 26 Notice when your landlord has already instigated the renewal or end of the tenancy process by issuing a Section 25 Notice. Instead, you respond to this using a Section 25 Notice.
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