The process of renewing a commercial lease explained

When a commercial lease approaches the end of its term, both landlords and tenants need to consider what happens next. Depending on the lease, a business tenant may have a statutory right to remain in the property and request a new tenancy under the Landlord and Tenant Act 1954.

The renewal process can involve statutory notices, strict deadlines, and negotiations over important commercial terms, including rent, lease length, break clauses, and repairing obligations.

Starting the process early gives both parties time to understand their position and negotiate terms before deadlines become critical.

If your commercial lease is approaching expiry and you need advice on renewal, contact our solicitors.

Does a tenant have the right to renew a commercial lease?

Many business tenancies have security of tenure under Part II of the Landlord and Tenant Act 1954.

Where the Act applies, the tenancy does not simply come to an end on the contractual expiry date. The tenant will generally have a statutory right to a new tenancy unless the landlord can establish one of the statutory grounds for opposing renewal.

However, not every commercial lease benefits from these protections.

A lease may have been 'contracted out' of the security of tenure provisions of the 1954 Act. This should have been agreed before the lease was granted using the prescribed procedure.

Establishing whether the existing lease is protected by the Act is therefore an important first step in any lease renewal.

What happens if a commercial lease is contracted out of the 1954 Act?

Where a lease has been validly contracted out, the tenant does not have the statutory right to renew provided by the 1954 Act.

The tenant will therefore usually need to leave the premises when the contractual term expires unless a new lease or other arrangement is agreed with the landlord.

This makes it particularly important for tenants with contracted-out leases to begin discussions with their landlord well before expiry if they want to remain in occupation.

When should you start thinking about commercial lease renewal?

Landlords and tenants should ideally consider their plans well before the contractual expiry date.

For tenants, this provides time to consider whether the premises still meet the needs of the business, assess the proposed commercial terms and investigate alternatives if necessary.

For landlords, it provides an opportunity to consider whether they wish to retain the tenant, recover possession or renegotiate the terms of occupation.

Where the lease is protected by the 1954 Act, the formal statutory process may be started by either the landlord or tenant.

James Halpin, senior partner and head of commercial property, says:

"Leaving a commercial lease renewal until the last minute can significantly reduce the options available to both landlords and tenants. Starting early provides time to understand the legal position, negotiate the commercial terms and deal with any issues before statutory deadlines become critical."

What is a Section 25 notice?

A Section 25 notice is served by the landlord and brings the existing protected tenancy to an end on the date specified in the notice.

The notice must specify a termination date that is not less than six months and not more than 12 months after it is served, and it cannot bring the tenancy to an end before the contractual expiry date.

There are two broad forms of Section 25 notice.

Where the landlord is prepared to grant a new lease, the notice will set out proposed terms for the new tenancy. These are proposals rather than terms the tenant is automatically required to accept, and negotiations can continue.

Alternatively, the landlord may oppose the grant of a new tenancy. Where this happens, the notice must state the statutory ground or grounds on which the landlord intends to rely.

What is a Section 26 request?

Rather than waiting for the landlord to begin the process, a tenant with a protected tenancy can serve a Section 26 request proposing the commencement of a new lease.

Again, the proposed commencement date must generally be between six and 12 months after the request is made and cannot be earlier than the contractual expiry date of the existing tenancy.

The request will include the tenant's proposals for the new lease.

If the landlord wishes to oppose the grant of a new tenancy, it must serve a counter-notice within two months of receiving the Section 26 request, identifying the statutory grounds on which it intends to rely.

Once one party has validly initiated the statutory process, the other cannot start the alternative procedure.

Can a landlord refuse to renew a commercial lease?

A landlord cannot simply refuse to renew a protected business tenancy because it would prefer a different tenant.

The 1954 Act provides seven statutory grounds on which a landlord may oppose the grant of a new tenancy. Broadly, these include:

• Failure by the tenant to comply with repairing obligations.
   
• Persistent delay in paying rent.
   
• Other substantial breaches of the tenant's obligations or reasons connected with the tenant's use or management of the premises.
   
• The landlord offering suitable alternative accommodation.
   
• Certain circumstances involving a subletting of part of a larger property.
   
• The landlord intending to demolish, reconstruct or carry out substantial works to the property.
   
• The landlord intending to occupy the property for its own business or as a residence.

Some of these grounds depend on tenant default, while others, such as redevelopment or landlord occupation, do not.

Where a landlord successfully opposes renewal on certain non-fault grounds, the tenant may be entitled to statutory compensation.

What terms can be negotiated when renewing a commercial lease?

Renewal is also an opportunity for both parties to reconsider the commercial terms of occupation.

Negotiations may cover:

• The rent payable under the new lease.
• The length of the new term.
• Break clauses.
• Rent review provisions.
• Repairing obligations.
• Service charge provisions.
• Rights to assign or underlet.
• Permitted use and alterations.

The starting point will depend on the existing lease, the property, current market conditions and the requirements of the landlord and tenant.

Where the renewal takes place under the 1954 Act and terms cannot ultimately be agreed, the court can determine the terms of the new tenancy.

How is the rent for the new lease decided?

Rent is often one of the most important points of negotiation.

The landlord and tenant can agree the rent between themselves, usually with input from their respective surveyors.

If agreement cannot be reached and the renewal proceeds to court, the court can determine the rent for the new tenancy based on the statutory framework and relevant market evidence.

It is therefore sensible for both parties to obtain appropriate valuation advice when the level of rent is in dispute.

What is interim rent?

The rent payable under the existing lease does not necessarily remain the appropriate figure throughout the renewal process.

The 1954 Act contains provisions allowing either party, in appropriate circumstances, to apply for an interim rent covering the period between the relevant statutory date and commencement of the new tenancy.

Interim rent can become particularly important where market rental values have changed significantly since the existing rent was agreed.

Landlords and tenants should consider the potential implications when negotiating the financial terms of the renewal.

What happens if the landlord and tenant cannot agree the new lease?

Many commercial lease renewals are resolved through negotiation without the need for a court to determine the terms.

However, if agreement cannot be reached, either party may apply to the court for a new tenancy.

There are strict statutory deadlines associated with the Section 25 and Section 26 procedures. These deadlines can sometimes be extended by written agreement between the parties, but they should not be allowed to expire inadvertently.

If the court is required to determine the new tenancy, it can decide matters including the rent, duration of the lease and other terms.

Taking advice early can help preserve your position while negotiations continue.

What happens when the new lease is agreed?

Once the commercial terms have been agreed, the parties' solicitors will negotiate and complete the documentation for the new lease.

The renewal provides an opportunity to ensure that the new documentation reflects the current agreement between the landlord and tenant rather than simply assuming that every provision of the old lease should continue unchanged.

Depending on the circumstances, the new lease may also need to be registered at HM Land Registry.

Proposed reform of the Landlord and Tenant Act 1954

The Law Commission is currently reviewing the security of tenure regime for business tenancies under Part II of the Landlord and Tenant Act 1954.

A second consultation on modernising the regime was published in June 2026. The existing statutory renewal process remains in force while the review continues.

We will update this guidance if changes to the law are introduced.

Help renewing a commercial lease

Commercial lease renewals can involve considerably more than agreeing a new rent. The statutory procedure, the timing of notices, and the terms negotiated for the new lease can all have significant consequences for landlords and tenants.

Our commercial property solicitors advise landlords and tenants throughout the lease renewal process, including Section 25 notices, Section 26 requests, negotiations over new lease terms and disputed renewals.

If your commercial lease is approaching expiry, or you have received a Section 25 notice or Section 26 request, contact our solicitors for advice.