Renewing a commercial lease in England and Wales

Lease renewals: the basics

In England and Wales, many business tenants have a legal right to stay on and ask for a new lease when their lease ends. This is called security of tenure and comes from Part II of the Landlord and Tenant Act 1954. A protected lease does not end on its expiry date: it continues on the same terms until ended in a way the Act allows.

Most renewals are agreed by negotiation, but formal notices, strict deadlines and the court sit in the background. Landlords and tenants should start planning 12 to 18 months before the lease ends.

The 1954 Act does not apply in Northern Ireland, which has its own rules (see our guide to conveyancing in Northern Ireland). The Law Commission, which recommends law reform, is reviewing the Act and consulted on detailed proposals in 2026. Any change would need new legislation, so the current rules apply for now.

Is your lease protected?

Not every business lease carries renewal rights. A lease is usually protected if:

• it is a lease, not a licence, which is a more limited permission to occupy
• the tenant occupies at least part of the premises for its business
• it is not a fixed term of six months or less, unless the tenant has been in occupation for more than 12 months
• it has not been contracted out of the Act

Contracting out means agreeing, before the lease is granted, that the renewal rights will not apply. The landlord must serve a warning notice and the tenant must sign a declaration, or a statutory declaration (a formal statement made before a solicitor or other authorised person) if the notice was served less than 14 days before the tenant committed to the lease. The lease should refer to both. A contracted-out lease ends on its expiry date with no right to a new one.

If a protected lease runs past its end date and nobody serves a notice, the same rent stays payable. A tenant who wants to leave can move out before the end date, or give at least three months' written notice.

Section 25 notices from the landlord

A landlord who wants to end a protected lease, or renew it on new terms, serves a section 25 notice on the official form. It must be given between 6 and 12 months before the termination date it names, and that date cannot be earlier than the date the lease would otherwise end.

The notice must say whether the landlord opposes a new lease. If it does, it must state its grounds. If not, it must set out proposals for the new lease, including the rent.

For example, if your lease ends on 30 September 2027, the landlord could serve a notice in February 2027 naming 30 September 2027 as the termination date. Never ignore a section 25 notice, because it starts the clock for applying to court.

Section 26 requests from the tenant

A tenant with a fixed term of more than one year can start the process instead by serving a section 26 request. It proposes the new rent and terms, and a start date between 6 and 12 months after the request, not earlier than the date the current lease would end. A request cannot be served after the landlord has served a section 25 notice, and once a request is made the landlord cannot serve one.

The landlord then has two months to serve a counter-notice, a reply saying it will oppose renewal and on which grounds. If it misses that window, it cannot oppose.

Tenants sometimes time a request tactically, for example proposing the latest possible start date when rents are rising so the old rent runs for longer. The landlord can respond by applying for interim rent, explained below.

Court deadlines you must not miss

If terms are not agreed, either side can apply to court. The deadline is strict:

• after a section 25 notice, the application must be made by the termination date in the notice
• after a section 26 request, it must be made by the day before the proposed start date
• a tenant cannot apply within two months of its own request unless the landlord has already served a counter-notice

The landlord and tenant can agree in writing to extend the deadline, and extend it again, as long as each agreement is made before the current deadline passes. A tenant who misses the deadline without an extension normally loses the right to a new lease, so diarise the dates and get advice as soon as a notice arrives. The Act is on legislation.gov.uk.

When a landlord can oppose renewal

A landlord can only refuse a new lease by proving one of the grounds in section 30 of the Act. In plain terms:

• the tenant has not kept the premises in repair
• the tenant has persistently paid rent late
• other substantial breaches of the lease by the tenant
• the landlord is offering suitable alternative accommodation
• the tenant sublet part, and the landlord could get more by letting the whole
• the landlord intends to demolish or rebuild and needs possession to do so
• the landlord intends to occupy the premises itself, a ground generally not open to a landlord that bought within the five years before the lease ends

For redevelopment or own occupation, the landlord must show a genuine and settled intention, usually backed by plans, funding or planning permission. A tenant who has to leave on one of the last three grounds is usually entitled to compensation based on the rateable value (the figure used for business rates), doubled if the business has been there for 14 years.

Interim rent and the new terms

Until the new lease starts, either side can ask the court to set an interim rent, a temporary rent that replaces the old one, applying no later than six months after the old lease ends. It runs from the earliest date that could have been named in the notice or request, so it matters to a landlord when rents are rising and to a tenant when they are falling.

If the court has to decide the new lease, it starts from the existing terms and changes them only for good reason. It can grant up to 15 years at an open market rent, ignoring value added by the tenant's own business and improvements. The points to negotiate are usually:

• the rent and how it will be reviewed
• the length of the term, and any break clause allowing an early exit, such as a ten-year lease with a tenant's break at year five
• repairs, and whether a schedule of condition, a record of the premises' state, should limit them
• service charges, rights to assign or sublet, and any guarantee
• whether the new lease will be contracted out

Dilapidations if you are leaving

If the lease ends and the tenant leaves, the landlord may claim for dilapidations, meaning breaches of the lease's repair, decoration and reinstatement obligations (reinstatement means removing the tenant's alterations). The claim usually starts with a schedule listing the work and its cost.

The law limits what a landlord can recover. Damages for disrepair cannot exceed the fall in value of the landlord's interest caused by the breach, and nothing is recoverable for repairs made pointless because the building will be demolished or substantially altered. A court protocol expects both sides to exchange information and to seek a settlement before any claim is issued.

Tenants should budget for dilapidations well ahead and get a building surveyor's view early. Carrying out agreed works before leaving, or negotiating a cash settlement, often costs less than defending a claim.

Checklist for the year before your lease ends

Most problems with renewals come from missed dates. Whether you are the landlord or the tenant:

• find the lease and check its end date, any break dates and whether it is contracted out
• decide early whether you want to renew, move or leave, and get advice on the market rent
• diarise every date as soon as a notice or request is served, including the court deadline
• agree any extension of the court deadline in writing before it expires
• tenants should budget for dilapidations, and landlords should check any ground for opposing renewal before relying on it
• agree heads of terms, the summary of the main deal points, before the new lease is drafted

Your solicitor checks whether the lease is protected, prepares or reviews the notices, tracks deadlines, starts court proceedings if needed and negotiates the new lease. You, often with a surveyor, decide the commercial terms such as rent, length and breaks.

Next steps

Lease renewals need a tailored quote because the work depends on the lease, the notices and how far talks have gone. Request a lease renewal quote from Keyfolio, usually prepared within one working day, or read about the lease renewal service. Taking a new lease elsewhere? See commercial leases for tenants.