What is a Section 26 Notice?
A commercial tenant whose lease is coming to an end may choose to seize the initiative and serve a section 26 request on the landlord for a new lease.
Only tenants whose leases have security of tenure under the Landlord and Tenant Act 1954 are able to serve a section 26 notice and the request cannot be served if the landlord has already issued a section 25 notice on the tenant.
The notice must be in the form prescribed by the courts and must set out the tenant’s proposed terms for the new lease, including the proposed lease term, rent and details of any break clause. Additionally, the notice must give between 6 and 12 months before the end of the current lease and the proposed start date of the requested new lease.
What to do upon receipt?
After receiving the section 26 notice, the landlord has two months to respond, in writing, known as a “counter notice” as to if the tenant’s request is accepted.
If the landlord does not serve a counter notice within this time frame, the tenant’s section 26 is seen as having been accepted in its entirety and a new lease must be entered into on the terms proposed within the request.
If the landlord does want to grant the tenant a new lease, but does not accept the terms proposed, the counter notice should set out their counter terms. It is worth noting that the tenant will only be entitled to a renewal lease on the same terms as their previous lease, except for the rent, and therefore the landlord can insist that the contractual term, rent review and break clauses along with all other key terms of the lease remain as they are in the existing lease.
If the landlord does not want to grant a new lease whatsoever, they will need to serve a counter notice setting out the terms as to why this is. As the tenant’s lease will have been protected under the Landlord and Tenant Act 1954, there are only a handful of grounds that the landlord can oppose a new lease on. These are as follows:
Premises are in disrepair
Arrears of rent
Other breaches of covenant
Suitable alternative accommodation
Tenancy was created by a sub-letting
Landlord’s intention to redevelop
Landlord’s intention to occupy
If you’re looking for legal advice in relation to a commercial lease, whether as a landlord or a tenant, our commercial property team are on hand to assist. Get in touch today on 0845 287 0939 or contact us by email.