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As a UK commercial landlord, you must know how commercial leases work, including the legal processes related to commercial leases. In addition, you need to know how to respond to any legal processes, such as notices your tenant may initiate. You must respond correctly per legal requirements and lease terms to avoid breaching the lease. For example, one lease notice your commercial tenant may serve you with is a Section 26 request if your commercial lease has security of tenure. This means the lease is protected, and your commercial tenant has a right to renew the lease on similar terms to the current one. This article will explain what you, as a UK commercial landlord, should do if you receive a Section 26 Notice from your tenant.
Section 26 Notice
When your commercial tenant’s lease term ends, two actions may occur. As the commercial landlord, you can serve a Section 25 Notice to let your tenant know the lease is ending, or they can preempt this. Where your commercial tenant preempts this, they serve you a Section 26 Notice. This requests a new tenancy where they propose new tenancy terms. For example, your commercial tenant may suggest a break clause. You should note that they cannot serve a Section 26 Notice if you have already served a Section 25 Notice.
Actions to take
As a commercial landlord receiving a Section 26 Notice, you must respond within two months with a counter-notice. You cannot serve a Section 25 Notice after you receive a Section 26 Notice. If you fail to meet the two-month timescale, your commercial tenant may consider their Section 26 Notice accepted. Consequently, you must enter a new lease with your tenant.
You can state these in the counter-notice if you wish to negotiate different lease terms. However, when considering your tenant’s lease terms, you should remember that your tenant only has a legal right to the same terms as their existing lease, apart from the rent.
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Opposing Lease Renewal
Where you decide to oppose the lease renewal, you also state this in the counter-notice. You will need to detail the reason why you oppose the lease renewal. As the lease is a protected lease with security of tenure, you can only list limited reasons opposing the lease renewal. These include:
- your tenant is persistently in arrears with their rent;
- the premises is in disrepair;
- your tenant has breached the lease, which renders the refusal of a new lease;
- you offer your tenant suitable accommodation instead with reasonable lease terms;
- the tenancy is from a sublease;
- you wish to redevelop; or
- you intend to occupy the property yourself.
Where you oppose the request to renew the commercial lease or cannot agree on new lease terms, you or your commercial tenant may apply to the court. Where this happens, the court will decide if the tenancy renewal should go ahead and settle the lease terms. In these cases, any new lease will start three to four months from when the court makes its decision.
Key Takeaways
If your lease has security of tenure, your commercial tenant can serve you a Section 26 Notice for a new lease, potentially with new terms between 6 and 12 months of the end of the lease. They can only do this if you have yet to serve a Section 25 Notice on them. You must respond to a Section 26 Notice with a counter-notice within two months of receipt of the former. You can respond by accepting the lease renewal and its terms, requesting to negotiate on the new terms or refusing the lease renewal. If you refuse the lease renewal, you should ensure that you do so according to the legal grounds permitted. Alternatively, if you refuse the lease renewal or cannot agree on new terms, you or your commercial tenant may apply to the court to decide.
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 a notice a commercial tenant serves on their commercial landlord to instigate the renewal process of a lease with security of tenure.
If you are a commercial landlord and receive a Section 26 Notice, you must respond with a counter notice to either accept the lease renewal and terms, negotiate the terms of the new lease or oppose the lease renewal.
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