The 1954 Act and the end of a commercial lease

At the end of a commercial lease, what happens next depends on whether the lease is within the Landlord and Tenant Act 1954, or outside it. This will have been agreed at the outset, with the tenant asked to sign a declaration, stating they understand the rights they would be giving up if the Act is excluded. If they didn’t, then the 54 Act applies, and they are entitled to a new lease on similar terms, save as to rent. The landlord can object, but they have limited grounds (seven to be precise, all detailed under s30(1) of the Act), and satisfying one of these will mean a fair bit of work to prove genuine, and may also involve paying compensation. 

In the last 12 months of a lease that is inside the Act, there are statutory notices that need to be served. A landlord needs to serve a notice under s25 of the Act, either proposing a new lease, or objecting and stating under which ground.  A tenant can pre-empt this and serve their own notice under s26, asking for a new lease, or s27, asking to bring the lease to an end. If neither party serves a notice, and the tenant stays after the end of the lease, then the lease continues under what is known as ‘hold over’, and carries on like this until notices are served. 

Sounds straightforward, but the reality is there is plenty there for surveyors and lawyers to argue about and get tactical over, and plenty of opportunity to trip-up - dates missed and drafting errors in notices in particular are ones to watch for. There is also the small matter of the new rent to be agreed between the parties, and if a landlord and tenant can’t agree, the Court can step in and decide it for them. 

If the lease is outside the Act, then the tenant is entirely at the mercy of the landlord over whether a new lease is granted. If nothing happens, at the end of the contractual term the lease ends. Landlords need to make sure they do not allow tenants to stay at the property, or continue demanding rent without formal agreement. There is no ‘hold over’ with a lease outside the Act – instead, the landlord risks bringing the lease into the Act, and accidentally giving the tenant security of tenure.