Section 25 Notices: What commercial landlords and tenants need to know
Making sure that a commercial lease is both set up and renewed or terminated correctly is key to both commercial landlords and commercial tenants. A Section 25 notice is one of the key documents used when a protected business lease is coming towards its end. It is the landlord’s formal notice under the Landlord and Tenant Act 1954, either proposing terms for a new lease or saying that the landlord opposes the tenant having a new lease.
What exactly is a Section 25 notice?
In simple terms, a Section 25 notice is the landlord’s way of starting the formal lease renewal process for a business tenancy which has security of tenure. A commercial lease protected by the 1954 Act does not simply stop on the contractual expiry date. Instead, it continues until it is brought to an end in one of the ways allowed by the Act.
The notice must be in the correct form. It must identify the property, the tenant and the landlord, give a termination date, and state whether the landlord is willing to grant a new tenancy. If the landlord is willing to renew, the notice should set out the proposed terms, such as rent, lease length and other key provisions. If the landlord is not willing to renew, it must state the statutory ground or grounds relied upon.
Who has security of tenure?
Security of tenure usually applies to a tenant who occupies premises for the purposes of a business and whose lease has not been validly contracted out of the Landlord and Tenant Act 1954. It gives the tenant an important statutory right: the right to remain in occupation and request a new lease at or following the end of the contractual term, unless the landlord can prove one of the limited statutory grounds of opposition.
Not everyone has that protection. A tenant may not have security of tenure if the lease was properly contracted out before completion, if the occupation is not for business purposes, if the arrangement is only a licence rather than a tenancy, or if another exclusion applies. The starting point is always to check the lease, the occupation, and any warning notice and declaration signed before the lease was granted.
How much notice does the landlord have to give?
A Section 25 notice must give not less than six months’ notice and not more than 12 months’ notice. The date specified in the notice cannot be earlier than the contractual expiry date of the lease.
That six to 12 month-window matters. Serve too early, too late, or with the wrong termination date, and the notice may be ineffective. Once a valid notice has been served, the parties can negotiate. If agreement is not reached, court proceedings may need to be issued before the termination date deadline, unless the parties agree in writing to extend time.
What happens if I miss the deadline?
If a tenant wants a new lease and the terms have not been agreed, missing the court application deadline can be serious. The tenant may lose the right to a new tenancy and may have to leave the premises. For a landlord, a defective notice or missed procedural step can delay plans, weaken negotiating position, and add unnecessary cost.
This is one of the reasons early advice is so important. The legal timetable often looks generous at first glance, but negotiations, valuations, evidence and court preparation can quickly take up the available time.
Friendly and hostile notices
A “friendly” Section 25 notice means the landlord is not opposing renewal. It brings the existing tenancy to an end on the stated date, but it also sets out the landlord’s proposed terms for a new lease. The tenant does not have to accept those terms automatically. They are the starting point for negotiation.
A “hostile” notice means the landlord is opposing the grant of a new lease. The landlord cannot simply say that it wants the property back. It must rely on one or more of the statutory grounds in section 30(1) of the 1954 Act and, if challenged, must prove the ground relied upon. Tenants are potentially entitled to be paid compensation by the landlord if the lease is terminated on grounds where the tenants are not at fault.
The seven statutory grounds in plain English
- The tenant has not kept the premises in the state of repair required by the lease.
- Persistent rent arrears. The tenant has repeatedly been late paying rent.
- Other substantial breaches. The tenant has seriously broken other lease obligations.
- Suitable alternative accommodation. The landlord can offer other premises which are reasonably suitable for the tenant’s business.
- Subletting of part. The tenant occupies only part under a sublease, and the landlord can get better value by letting the whole property together.
- The landlord intends to demolish, reconstruct or carry out substantial works which cannot reasonably be done while the tenant remains in occupation.
- Landlord’s own occupation. The landlord intends to occupy the premises for its own business or, in some cases, as a residence.
Some grounds focus on tenant default. Others focus on the landlord’s plans for the building. The evidence needed will depend on the ground being used, and hostile notices should never be treated as a formality.
Contracting out of the 1954 Act
Contracting out means the landlord and tenant have agreed, before the lease is completed, that the tenant will not have the statutory right to renew the lease at the end of the term. The correct warning notice and declaration procedure must be followed.
For tenants, this means giving up a valuable protection. When the fixed term ends, there is no automatic right to stay and no right to ask the court for a new lease under the 1954 Act. The tenant may still be able to negotiate a new lease, but that depends on the landlord’s agreement.
Landlords often ask for contracting out because it gives them greater control. They may want flexibility to redevelop, sell, occupy the property themselves, review the tenant mix, or renegotiate from a stronger position when the term ends. That does not mean contracting out is always wrong for a tenant, but it should be understood before anything is signed.
Common mistakes landlords make
Landlords most commonly get into difficulty by using the wrong form of notice; miscalculating the six to 12 months’ notice period; allowing the notice to lapse and not immediately seeking possession; serving the notice on the wrong party; failing to follow the service provisions in the lease; or relying on a hostile ground without having the evidence to support it.
Another frequent problem is tactical rather than technical. A landlord may serve a notice without first deciding what it really wants: a new lease at a higher rent, vacant possession, redevelopment, or simply a better negotiating position. The notice should fit the commercial objective.
Common mistakes tenants make
Tenants often assume that a lease expiry date gives them plenty of time, or that continued occupation means everything is safe. It may not. A Section 25 notice starts a timetable, and the date for applying to court must be diarised immediately. Not commencing court proceedings or agreeing an extension to the deadline to do so is a common mistake made by tenants.
Other mistakes include ignoring proposed new terms, failing to take valuation advice, overlooking repair issues that could support a hostile ground, and assuming that a contracted-out lease carries renewal rights when it does not.
How Fraser Dawbarns can help
Fraser Dawbarns advises both landlords and tenants on commercial tenancies, lease renewals and the notice procedures under the Landlord and Tenant Act 1954. We can check whether the Act applies, prepare or review Section 25 notices, advise on friendly or hostile notices, help negotiate renewal terms, and act where court proceedings are needed.
Our aim is to keep things clear and practical. Whether you are a landlord planning ahead or a tenant who has just received a notice, early advice can protect your position and improve the chances of reaching the right commercial outcome.
How To Contact Us:
To contact a member of our team, you can fill in our online enquiry form, email info@fraserdawbarns.com, or call your nearest office below. If you’d like to speak to a member of our team at one of our offices across Norfolk and Cambridgeshire, visit our offices page.
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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP is always happy to provide such advice.