Landlord and Tenant Act 1954

The Landlord and Tenant Act 1954 (1954 Act) is one of the most important pieces of legislation relating to English leases of business premises.

Where premises are occupied for business purposes then the tenant will, under the 1954 Act, gain the benefit of statutory security of tenure. This gives them rights to remain in the property on expiry of the contractual term of the lease, providing that the tenant remains in occupation for the purposes of its business (although the landlord can oppose an application for a new tenancy on the grounds listed in section 30 of the legislation). This at the end of the contractual term is what we refer to as “holding over”.

Excluding security of tenure

If the landlord wishes to exclude security of tenure under the 1954 Act, this is done before the tenant enters into the lease or becomes contractually bound to do so e.g. under an agreement for lease. It is done by following a statutory procedure that involves the landlord serving notice on the tenant in a prescribed form and typically having the tenant swear a statutory declaration stating that they are aware of the consequences of security of tenure being excluded. The signing of the statutory declaration must be witnessed by a commissioner for oaths, a notary public, or a solicitor who is qualified in England and Wales. The agreement to contract out must also be set out in the lease and is usually in the section after the tenant covenants. It is key for the whole process to be completed before the tenant enters into the lease or becomes contractually bound to do so. If not, the exclusion of security of tenure will be void and the tenant will have the full protection of the 1954 Act.

1954 Act notices

At, or close to expiry of the contractual term where the landlord believes they are entitled to increase the rent, the landlord should contact the tenant to gauge its intentions going forward. If the landlord is willing for the tenant to take a new tenancy, it should serve a non-opposed “friendly” section 25 notice which proposes terms for a new lease, bringing the current lease to an end under the 1954 Act (a “non-opposed notice”).

The notice must be served on six to 12 months’ notice. Once a non-opposed notice is served, it usually triggers negotiations between the parties. If negotiations are not progressing satisfactorily, it is open to either the landlord or the tenant, after a period of two months, to issue court proceedings. Non-opposed court proceedings are very procedural, and directions are agreed (or given by the court in the absence of agreement) for an exchange of leases and a narrowing down of terms on a without prejudice basis. If the parties cannot agree terms for a new lease, then the court will direct the terms for a new lease. The terms are usually based on the terms of the current lease, subject to reasonable modernisation except for rent, which is based on a valuation exercise, and also the duration which is at the discretion of the court based on submissions from the parties and factor in issues such as landlord’s future intentions, market conditions and the tenant’s future plans for its business.

Alternatively, if the landlord has alternative plans for the property (such as redevelopment) it can oppose the grant of a new lease. This can either be done by service of a hostile section 25 notice or a hostile counter-notice in response to a tenant’s request for a new tenancy, pursuant to section 26 of the 1954 Act (the “section 26 notice”). The grounds on which a landlord can oppose include redevelopment, a breach of repairing covenant, breaches of other obligations, and a historic persistent delay in payment of rent (not including for periods during the COVID pandemic). More strategic and specialist advice will be required if you wish to secure vacant possession of the property.

To protect its security of tenure, by either (a) the date in the non-opposed notice or (b) the date immediately preceding the date in the section 26 notice, the tenant must have issued proceedings for a new tenancy, documented an extension to the relevant date with the landlord, or completed a new lease. Alternatively, the landlord can issue proceedings. Whether or not it wishes to do so, and be bound by the court’s valuation methodology in respect of the rent for the new lease, is a matter for consideration and further advice should be sought.