Lease Renewal Under the 1954 Act: Section 25 and Section 26 Notices

Which leases are protected

The 1954 Act's renewal regime applies to a lease where:

• The tenancy includes premises occupied by the tenant for the purposes of a business carried on by it (s.23(1))
• The lease is not contracted out under section 38A (more on this below)

A lease can be excluded from protection if both parties followed the section 38A contracting-out procedure when the lease was granted: the landlord must have served a "warning notice" before grant, and the tenant must have made a declaration acknowledging the loss of statutory rights. If those steps were not followed properly, the lease is protected, even if it says it is contracted out.

This is worth checking carefully. Many leases described as "contracted out" turn out, on inspection, not to comply with section 38A — and the tenant has a renewal right after all.

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The two routes — sections 25 and 26

Either side can start the renewal process.

The landlord's route — section 25

The landlord serves a section 25 notice. The notice must:

• Be in the prescribed form — Schedule 2 Form 1 (where the landlord does not oppose renewal) or Schedule 2 Form 2 (where the landlord opposes renewal on one or more section 30 grounds) under the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004 (SI 2004/1005)
• Identify the property and the lease
• Specify a termination date — between 6 and 12 months from service, and not earlier than the contractual term date
• State either that the landlord does not oppose renewal (and propose terms), or that the landlord opposes renewal (citing the section 30 ground or grounds)

A friendly section 25 starts the negotiation. An opposed section 25 puts the tenant on notice that they will need to fight for renewal at court — and if they do not, the tenancy ends on the specified date.

The tenant's route — section 26

The tenant serves a section 26 request for a new lease. The request must:

• Be in the prescribed form (Form 3 in Schedule 2 to SI 2004/1005)
• Specify a date for the new lease to begin — between 6 and 12 months ahead, and not earlier than the contractual term date
• State the proposed terms of the new lease

A section 26 request forces the landlord's hand. Within two months of the making of the request (s.26(6)), the landlord must serve a counter-notice if they oppose renewal — and the counter-notice must specify the section 30 ground(s).

If the landlord does not serve a counter-notice within two months, they cannot oppose renewal at all. This is a hard deadline.

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Section 30 — the seven grounds for opposition

A landlord opposing renewal must rely on one or more of the seven grounds in section 30(1):

Compensation under section 37 is paid for grounds (e), (f), and (g). The amount is one or two times the rateable value, depending on the length of occupation (appropriate multiplier 1: SI 1990/363 art 4; doubled after 14 years' business occupation: s.37(2)–(3)).

Grounds (f) and (g) are the most-litigated. Both require the landlord to prove a genuine, settled intention at the trial date — not just a vague plan. S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62 is the leading case on ground (f): the landlord's intention must not be conditional on the tenant's claim for a new tenancy; the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily (Franses at [19]).

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The court application — CPR Part 56

If the parties cannot agree, the matter goes to court. The procedure is in CPR Part 56 and Practice Direction 56.

Who applies, and when

Either side can apply, but only one application can be in being. Whoever applies first is the claimant; the other is the defendant.

The deadline depends on the route:

• (a) after a s.25 notice, on or before the termination date in the notice;
• (b) after a s.26 request, before the date specified in the request and not within two months of the request unless the landlord has served a counter-notice (s.29A(2)–(3));
• (c) extensions only by written agreement made before the current deadline (ss.29B, 69(2)) (a so-called "section 29B agreement")

If no agreement is reached and no court application is made before the deadline, the renewal right is lost. The tenancy then ends on the date in the notice (s.25) or immediately before the date in the request (s.26(5)); the statutory continuation under s.24 ceases.

What the court decides

In a contested case, the court determines:

• Whether the landlord has made out a section 30 ground
• If renewal is granted, the terms of the new lease — duration, rent, repairing obligations, alienation, break clauses

The court can also approve a settlement on agreed terms ("ordered terms").

Interim rent — section 24A

While the matter is at court, the contractual rent continues but the landlord (or sometimes the tenant) can apply for interim rent under section 24A. The court fixes interim rent as the new-tenancy rent where s.24C applies; otherwise the rent it is reasonable for the tenant to pay while the tenancy continues (s.24D).

This is often a strategic choice: a landlord under-let on the contractual rent will apply for interim rent; a tenant on a passing rent above market may apply themselves to bring it down.

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Setting the new rent

The new lease's rent is determined under section 34. The starting point is the open-market rent at the date of the hearing (or at the date the new tenancy is to begin — sometimes there is a gap), assuming:

• A willing lessor and willing lessee
• All other terms of the new tenancy as fixed by the court
• Disregarding the effect of the tenant's occupation (s.34(1)(a))
• No goodwill of the tenant taken into account
• No improvement carried out by the tenant taken into account, where the improvement was not a contractual obligation and was completed not more than 21 years before the application to the court (s.34(2)(a))

In practice the rent is set by expert evidence — surveyors call comparable evidence from recent open-market lettings of similar properties.

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Setting the new lease terms — section 35

The court fixes the terms of the new lease under section 35 by reference to the existing lease, with such modifications as are reasonable. The leading case is O'May v City of London Real Property Co Ltd [1983] 2 AC 726.

The party seeking a change to existing terms bears the burden of justifying it. Common areas of disagreement:

• Length of term — landlords often want shorter, tenants want longer
• Rent review — pattern, mechanism, upward-only or up-and-down
• Repairing covenant — full repairing vs internal repairing
• Alienation — restrictions on sub-letting and assignment
• Break clause — whether one is included; if so, on what terms

The court keeps modifications limited. A radical rewrite of the lease is unlikely to be ordered against opposition.

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Costs

The 1954 Act renewal procedure is in the County Court (PD 56 para 2.2); the High Court only in exceptional circumstances (Property, Trusts and Probate List).

Costs follow the event (CPR 44.2(2)(a)). A landlord who fails on a section 30(f) or (g) ground typically pays the tenant's costs.

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Practical timeline

Assume a contractual term date of 31 December 2026. Here is how a friendly process might run.

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Bundle preparation for a 1954 Act trial

A 1954 Act renewal trial bundle commonly contains:

• Section A: Pleadings (Claim Form, Particulars of Claim, Defence, replies)
• Section B: Notices (section 25, section 26, counter-notice, agreements extending time)
• Section C: Existing lease and any side letters or variations
• Section D: Witness statements
• Section E: Surveyor's report — claimant
• Section F: Surveyor's report — defendant
• Section G: Joint surveyors' statement
• Section H: Comparable evidence and market data
• Section I: Building condition survey (if section 30(f) or (a) in issue)
• Section J: Inter-party correspondence
• Section K: Authorities

CPR Part 32 governs witness statements; Part 35 governs expert reports. The trial bundle is paginated continuously throughout (PD 32 para 27.8) unless the court directs otherwise.

BundleCreator's Commercial Property template structures the bundle in the order trial counsel and the trial judge expect. Pagination, hyperlinked index, OCR, and bookmarks are produced automatically. A bundle that takes 8-15 hours to assemble manually is usually finished in around 30 minutes.

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Frequently asked questions

What happens if the section 25 notice is in the wrong form?

A defective section 25 notice can be void. A void notice does not start the process; the contractual lease continues, and the landlord must re-serve. Notices must be on the prescribed form or 'a form substantially to the same effect' (SI 2004/1005 reg 2(2)); errors in statutory notices are judged by the Mannai reasonable-recipient approach unless the statutory context indicates otherwise (Lay v Ackerman [2004] EWCA Civ 184 at [65]).

Can the tenant withdraw a section 26 request?

The Act has no withdrawal mechanism; once made, the request terminates the current tenancy immediately before the date it specifies (s.26(5)), subject to proceedings and any s.29B agreement.

Can the landlord oppose on a ground developed after service of the section 25 notice?

No. The landlord may rely only on grounds stated in its s.25 notice or s.26(6) counter-notice (s.30(1)).

What about a fixed-term lease that has already expired without notice being served?

If the tenancy is one to which Part II applies, it continues automatically on the same terms after the contractual term date until ended under the Act (s.24(1)).

What is a "section 29B agreement"?

A written agreement between the parties extending the deadline to apply to court. The agreement must be made before the deadline expires and must be in writing (s.69(2)). Section 29B agreements are common in friendly cases and effectively buy time for negotiation.

Can I represent myself?

Possible for simpler cases, but 1954 Act renewals are technical and the consequences of getting them wrong are severe (loss of premises). Many tenants instruct a solicitor and surveyor; many landlords have an in-house team.

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Further reading

• Landlord and Tenant Act 1954 — particularly Part II
• CPR Part 56 and PD 56 — Landlord and tenant claims
• LTA 1954 Part 2 (Notices) Regulations 2004 (SI 2004/1005) — Notice forms
• Dilapidations Claims: Section 18 Cap and Tenant Defence Strategies
• Service Charge Disputes in Commercial Leases: How Tenants Challenge Costs