Section 25 Notices

Introduction

A Section 25 Notice is used to inform a tenant either of proposed terms for a new lease or to oppose renewal.

What is a Section 25 Notice?

Commercial (Business) Tenancies in England & Wales are regulated by the Landlord & Tenant Act 1954 (Part 2) and the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. This legislation provides for security of tenure. Security of tenure is the right of a tenant to renew the tenancy when it comes to an end. In practice this means that the tenant has an automatic right to renew his lease on similar terms to the old one.

Landlords can in certain circumstances, oppose renewal of the tenancy for example for failure to pay rent, or if the landlord wants to redevelop the premises. Landlords can either apply to the court to end the tenancy, or can oppose the tenant’s application for renewal.

The Section 25 Notice is used to inform the tenant either of proposed terms for a new lease or to oppose renewal.

To end a current tenancy

To end a current tenancy and propose terms for renewal or to prevent the tenant renewing, you must send the tenant a Section 25 Notice.

There are two different Section 25 Notices depending on whether the landlord is willing to renew the tenancy:

• Section 25 Notice (opposing renewal);
• Section 25 Notice (not opposing – proposing renewal).

How to apply for possession

The landlord can challenge this right to renew and oppose renewal if the tenant has seriously breached the terms of the lease agreement (for example, by failure to pay rent) or on other specific grounds (for example if the landlord wants to develop the land).

One neat way around this situation for the landlord is to “op-out” of the Act. To do this the landlord must get the tenant to agree to this prior to signing the lease agreement in the first place. This then puts the agreement on a purely contractual footing, with no statutory protection for the business tenant. Of course this is not an advisable solution if you are the tenant!

Alternatively, the landlord can propose renewal, also with a Section 25 notice. (Of course the contents of each differ!)

How to serve the notice

If you oppose the renewal, the notice must be served between 6 and 12 months before you want the present tenancy to end.

The Section 25 Notice cannot be served on the tenant if the tenant has pre-empted this by serving a Section 26 Notice first.

Once a valid Section 25 Notice has been served it can only be withdrawn where the landlord terminates his position and a new landlord takes up that position. That is, the existing, or new landlord is not opposed to the renewal of the tenancy and accordingly, intends to withdraw the notice given by the previous landlord.

Where the tenant does not respond to the notice:

• The tenancy will either continue on the proposed new terms; or
• Where the landlord has served an opposing notice, the tenancy will end on the date specified.

Where the tenant responds

Where the tenant responds to an opposing notice requiring renewal, or where the tenant has applied to the court for renewal, the landlord will need to apply to the court and convince the court that his grounds for ending the lease can be justified under the Act.

Where the court orders renewal, a new lease must be granted on new terms.

Interim Rent

Pursuant to the reforms, either a landlord or a tenant may apply to the Court for the determination of an interim rent if a Section 25 or Section 26 notice has been served. Only one application may be made – so it is first come, first served.

In line with Section 24B of the 1954 Act, if a Section 25 Notice has been served, interim rent will be payable from the earliest date which could have been specified in the Notice as the date of termination.

Advice for tenants

Tenants do not have to respond to proposing or opposing notices, however, by not doing so, they could be accepting the consequences by default.

Of course none of the above is applicable in Scotland, or in England and Wales if the tenant and landlord had opted out of the Landlord and Tenant Act 1954 when the lease was first agreed.