Lease expiry: please re-lease me

By Stuart Stone contact

- Last updated on GMT

Lease expiry: what are the grounds for a landlord to withhold a new lease on lease expiry?
Lease expiry: what are the grounds for a landlord to withhold a new lease on lease expiry?
When the time comes to get the ball rolling on lease renewal proceedings, tenants should be aware of the legal grounds that their landlord may choose to withhold a new agreement

Legal grounds to oppose lease renewal

According to the 1954 Landlord & Tenant Act, there are seven legal grounds upon which a landlord can oppose lease renewal.

A - If the property is, or has persistently been, in a state of disrepair

B - If there have been persistent delays in paying rent

C - If there have been any other substantial or persistent breaches of the lease during tenancy

D - If the landlord can provide alternative premises for the tenant to occupy

E - If the lease is part of a larger premises where the landlord can obtain better rental return, for example, by letting the premises as a whole

F - If the landlord intends to redevelop the property

G - If the landlord intends to occupy the property themselves

Not all tenants have the automatic right to renew when a tenancy expires, in which case reaching an agreement before the previous one expires – if your lease isn’t covered by
the Landlord and Tenants Act of 1954 – is vital if you want to continue your occupation of a site.

Phil Smith, senior associate at leisure property specialist Fleurets, maintains that ascertaining whether or not this act covers your lease is vital, even though it doesn’t necessarily offer guaranteed renewal.

He says: “This is an act that was brought in to give tenants security of tenure so, when your lease expires, you’re entitled to a new one based on the terms of the existing lease unless the landlord is able to prove a number of grounds.”

Chris Rogers, associate director of commercial property consultancy Everard Cole points out that the seven legal grounds (see boxout), detailing circumstances in which a landlord would have the right to take back a property at renewal, are clearly set out in the act.

These include circumstances relating to the tenant’s previous lease period, such as the condition of the property and the tenant adhering to the conditions of the existing agreement, as well as the landlord’s future plans for the site.

Rogers explains: “As long as the lease has not been contracted out of the security of tenure provision, the landlord must be able to state one or more specific grounds to oppose renewal.

“These grounds must be substantiated by the landlord with evidence. For example, disrepair would need to be substantial, and remain unremedied, and the landlord would need to demonstrate the tenant was under an obligation to maintain and repair, and there had been an actual breach.

“Similarly, any late payment of rent would need to be long lasting and substantial.”

Need to be in occupation

According to Rogers: “It’s important to remember that the tenant must be in occupation at the end of the lease, and the lease is protected where the tenant has the right to renew. Likewise, the lease does not automatically come to an end unless the tenant vacates, or is served notice.

“In this situation the tenant would continue in occupation, commonly called ‘holding over’, which can carry on indefinitely under the terms of the existing lease.”

Rogers states that, most commonly, a landlord will initiate renewal proceedings.

He says: “Generally, a landlord would serve a Section 25 notice, which needs to be given a minimum of six months and a maximum of 12 months prior to the end of the lease, setting out the grounds for opposing a renewal.”

However, Smith points out that the renewal process can also be kick started by the licensee serving a Section 26 notice.

He adds: “If the landlord wants to oppose a Section 26 notice they have to respond within two months stating the ground (from A to G, see box) on which the new lease is being refused.

“If the property is in a bad state of disrepair, they will be sent a list of all the repair works they have to do. The tenant will then either do the works or cover the cost of repairs as outlined.

“The first four of those grounds (A to D) can usually be remedied – if you put the property into repair or you’re up to date with your rent account then a court would probably look at that favourably. But it’s the redevelopment ones, or owner-occupation which, if a landlord can offer proof, are the most likely grounds they’ll be able to refuse a new lease.

“However, if a new lease is refused for grounds E, F and G, the tenant is entitled to compensation.

“If they’ve been in occupation for fewer than 14 years they get the rateable value multiplied by one as compensation, if they’ve been in occupation longer, they get twice the rateable value as compensation.”

Smith states that it’s possible for a tenant to challenge grounds if they don’t feel evidence has been provided.

“If a landlord says they want to redevelop, you don’t just have to accept it and come out of your lease. The landlord has to prove intent that they do intend to redevelop the property. You need to see planning permission.

“If you don’t accept that they’re going to redevelop, your recourse is to go to court to fight their objection.

“In all circumstances, when you’re coming towards the last two years of your lease, it’s a good idea to get in touch with a solicitor or surveyor to advise on the next stages. You will certainly need a solicitor to deal with all the notices and drafting the new lease, and the surveyor will be negotiating the rent and all the other terms in the new lease. Take advice early.” 

To find out more about pubs for sale, lease and tenancy visit our property site​.

Related topics: Property law

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