The Landlord and Tenant Act 1954 is the most important piece of legislation affecting commercial tenants in England and Wales. It has been in force for over 70 years, and its core purpose remains unchanged: to give business tenants the right to remain in their premises when their lease expires, rather than being left at the mercy of a landlord who could simply refuse to renew.
Whether you are signing a commercial lease for the first time, approaching the end of an existing term, or dealing with a landlord who wants possession back, the 1954 Act shapes your rights and your options at every stage. This guide explains what the Act does, how security of tenure works in practice, what contracting out means, and how the renewal process operates from start to finish.
What the Landlord and Tenant Act 1954 actually does
Part II of the Landlord and Tenant Act 1954 applies to tenancies where the premises are occupied by the tenant for the purposes of a business. If your lease falls within the Act — and most commercial leases do, unless they have been specifically excluded — two things happen automatically when your contractual term comes to an end.
First, the lease does not simply expire. It continues on the same terms until it is formally ended through the statutory procedure. The tenant stays in occupation, continues paying rent, and remains bound by the lease covenants. Second, the tenant acquires the statutory right to apply for a new lease. This combination of continuation and renewal rights is what the Act calls security of tenure.
The Act applies to tenancies in England and Wales. It does not apply to tenancies of six months or less (though the Law Commission has provisionally proposed raising this threshold), agricultural holdings, mining leases, or tenancies where the tenant is also the immediate landlord of a sub-tenant.
Security of tenure: what it means and why it matters
Security of tenure is the term used to describe the bundle of rights a tenant has under the Landlord and Tenant Act 1954 to remain in their business premises and to obtain a new lease when their current one ends. For many businesses — a high-street retailer, a professional services firm in a long-established location, a manufacturer whose equipment is fixed to a building — the ability to stay in the same premises is not a preference; it is a commercial necessity.
Before the Act was introduced following the Second World War, landlords were free to refuse renewal at the end of a term without consequence. Tenants had invested goodwill and trade in a location, and could find themselves evicted with no compensation and no right to stay. The Act reversed this by making statutory renewal the default position.
Security of tenure gives tenants three core protections:
- Automatic continuation: the tenancy does not end when the contractual term expires — it continues until terminated through the proper statutory process
- Right to a new lease: the tenant can apply for a new tenancy on broadly the same terms as the existing one, with rent adjusted to the current open-market rate
- Compensation on refusal: if a landlord successfully opposes renewal on certain grounds, the tenant may be entitled to statutory compensation calculated by reference to the rateable value of the premises
Not every business needs the full protection of the Act. But every business tenant should understand whether their lease is inside or outside its provisions — because the difference determines what happens at the end of the term.
Contracting out of the Landlord and Tenant Act 1954: what it involves
The parties to a commercial lease can agree, before the lease is granted, to exclude the tenant’s security of tenure rights. This is known as contracting out of the Landlord and Tenant Act 1954, and leases on this basis are often described as “outside the Act” or “contracted-out leases”.
Contracting out is permitted only if a strict procedure is followed before the lease is executed. The landlord must serve a formal warning notice on the prospective tenant explaining what rights they are giving up. The tenant must then make a statutory declaration — either a simple declaration signed before an independent solicitor, or a sworn declaration before a solicitor or commissioner for oaths — confirming that they understand the effect of excluding the Act. The agreement to contract out must then be recorded expressly in the lease itself. If this procedure is not followed correctly, the exclusion is invalid and the tenant retains their statutory rights.
It is important to record whether a lease is inside or outside the Act at the earliest stage of any commercial deal. Whether security of tenure applies is one of the key points that should be agreed and documented in the heads of terms before solicitors begin drafting. Our guide to what heads of terms cover in a commercial lease explains why this decision, and others like it, need to be settled before the formal lease is prepared.
When contracting out makes commercial sense
Contracting out is not automatically disadvantageous to tenants. In some circumstances it is a reasonable commercial position. Landlords sometimes offer better rent terms, greater flexibility, or shorter terms to tenants who agree to contract out, because it gives them more certainty about recovering possession at the end of the term.
For short lettings — an office for an initial 12-month period, a pop-up retail unit, or temporary storage space — a contracted-out lease reflects the genuine nature of the arrangement. Neither party expects or needs the permanence of statutory renewal rights in those circumstances.
For longer lettings where the tenant has invested significantly in fitting out the premises, built a customer base from the location, or where the business depends on that particular address, contracting out is a significant concession that warrants careful consideration and, in most cases, negotiation.
What contracting out means in practice
A contracted-out commercial lease expires automatically at the end of the contractual term. There is no continuation of the tenancy. The landlord is not required to offer a new lease, is not obliged to compensate the tenant for leaving, and can recover possession simply by the term expiring. The tenant’s only option, if they wish to remain, is to negotiate a new lease on whatever terms the landlord is willing to offer — without any statutory floor on what those terms must be.
Approaching lease expiry or received a section 25 notice?
Missing a Landlord and Tenant Act 1954 deadline can destroy your renewal rights. Speak to a commercial lease solicitor to assess whether your lease is protected, whether the landlord can oppose renewal, and what steps you need to take now.
How the renewal process works under the Act
Where a lease is protected by the Landlord and Tenant Act 1954, the renewal process is a formal statutory procedure that begins with either a section 25 notice served by the landlord, or a section 26 request served by the tenant. The two routes are mutually exclusive — once one party has served their notice, the other cannot serve their own.
Section 25 notice: the landlord’s route
A section 25 notice is the formal document by which a landlord initiates the end of a protected tenancy. It must specify a termination date that falls between six and twelve months after it is served, and that date cannot be earlier than the contractual expiry of the lease.
A section 25 notice can be either “friendly” or “hostile”. A friendly notice — also known as an unopposed notice — indicates that the landlord is willing to grant a new tenancy and sets out the terms on which they propose to do so, including the proposed rent. A hostile notice specifies one or more of the seven statutory grounds of opposition on which the landlord will rely to resist the grant of a new lease. Understanding the difference matters: once a hostile notice is served, the tenant must decide whether to accept the position or contest it.
Section 26 request: the tenant’s route
A section 26 request is served by the tenant who wishes to obtain a new lease. It must specify the date on which the tenant proposes the new tenancy should begin — again between six and twelve months ahead — and set out the proposed terms. On receipt of a section 26 request, if the landlord wishes to oppose the grant of a new tenancy, they must serve a counter-notice within two months specifying the grounds of opposition. Failure to serve a timely counter-notice bars the landlord from opposing renewal.
Grounds on which a landlord can oppose renewal
A landlord under the Landlord and Tenant Act 1954 cannot simply refuse to renew a protected tenancy because they would prefer vacant possession. Refusal is only available on one or more of the seven statutory grounds set out in the Act. Three of these are fault-based grounds that relate to the tenant’s conduct; four are non-fault grounds that depend on the landlord’s intentions for the property.
The fault-based grounds include persistent arrears of rent, material breaches of repairing obligations, and other substantial breaches of the tenant’s covenants. Where a landlord relies on fault grounds, the tenant’s conduct during the tenancy becomes directly relevant to whether they can retain the right to stay.
The non-fault grounds include the landlord’s intention to redevelop the property — the most commonly used — the landlord’s intention to occupy the premises themselves, the availability of suitable alternative premises, and in some multi-let situations, the landlord’s ability to obtain a better return by letting the whole property as a single unit.
Ground (f) — redevelopment — is the ground that generates the most litigation. To succeed, a landlord must demonstrate a firm and settled intention to carry out substantial construction works that could not be done without possession. Good intentions are not enough: the landlord must be able to show that planning, finance, and the practical means of carrying out the works are in place. A vague aspiration to develop does not suffice.
Where a landlord successfully opposes renewal on any of the non-fault grounds, the tenant is entitled to statutory compensation. This is calculated at one or two times the rateable value of the premises, depending on how long the tenant has been in occupation. Where a landlord’s opposition fails and the tenant has incurred legal costs, those costs become relevant to the commercial settlement.
Tenants facing an opposed renewal, or who have received a section 25 notice specifying grounds they believe cannot be sustained, need legal advice quickly. The statutory timetable is strict. Our landlord and tenant disputes team regularly advises commercial tenants in exactly this position, helping them assess the strength of the landlord’s grounds and decide whether to challenge or negotiate.
What terms apply to a renewed lease?
Where a new tenancy is granted — whether by agreement or by court order — it takes effect on broadly the same terms as the existing lease, updated to reflect current market conditions. Rent is the main variable: under an unopposed renewal, the new rent is the open-market rent for the premises at the date of the new tenancy, assessed as if let on the open market to a willing tenant for the same use.
Other terms — the lease length, the repairing obligations, the permitted use, break clauses, and alienation rights — should replicate the existing lease unless there is a good reason to depart from them. In practice, landlords often use the renewal as an opportunity to modernise the lease terms, and tenants should be alert to attempts to introduce less favourable provisions under the guise of routine updating.
Where the parties cannot agree the terms of the new lease, either can apply to the court. The court has wide powers to determine the terms and length of the new tenancy, but it will generally try to reflect what a willing landlord and willing tenant would agree in the open market. Understanding the full range of commercial lease terms and what each one means for your business obligations is important context when approaching any renewal negotiation.
Critical time limits you cannot afford to miss
The Landlord and Tenant Act 1954 imposes strict procedural deadlines that, if missed, can result in the permanent loss of a tenant’s renewal rights. These are not administrative formalities — they are hard cut-offs.
The key time limits to understand are:
- Notice window: a section 25 notice or section 26 request can be served no more than 12 months, and no less than 6 months, before the proposed termination or commencement date
- Court application deadline: where a section 26 request or section 25 notice has been served, the tenant must issue a court application for a new tenancy before the date specified in the notice — failure to do so extinguishes the right to renew
- Landlord counter-notice: on receipt of a section 26 request, the landlord has two months to serve a counter-notice opposing renewal; missing this window bars them from relying on opposition grounds
- Compensation claim: a claim for statutory compensation must generally be made within the time limits set out in the Act; delay can affect recovery
These deadlines make it essential to take legal advice well in advance of a lease expiry, not when a notice has already been received. Our specialist team can advise on lease extensions, variations, and the renewal process and ensure that the procedural steps are handled correctly from the outset.
The Law Commission review: what changes may be coming
The Landlord and Tenant Act 1954 has not been substantially reformed since 2004. In March 2023, the Law Commission was asked to review Part II of the Act with the aim of modernising the commercial leasehold framework for current market conditions.
Following a first consultation that closed in February 2025, the Law Commission published an interim statement confirming that the contracting-out model of security of tenure should be retained — meaning tenants will continue to have statutory renewal rights unless they agree otherwise before the lease is granted. The Commission has also provisionally proposed increasing the minimum tenancy duration that falls within the Act from six months to two years. A second consultation paper is expected in spring 2026.
For practical purposes, the current Act remains fully in force and its provisions continue to govern all commercial leases in England and Wales. The Law Commission’s project page on business tenancy renewal sets out the full background to the review and the interim conclusions reached to date.
Get expert legal advice before the deadline passes
The Landlord and Tenant Act 1954 provides meaningful protection for commercial tenants — but only if the rights are understood and exercised within the correct timeframes. Whether you are a tenant approaching lease expiry, a landlord seeking to recover possession, or either party assessing whether to contract out of the Act, the decisions you make have long-term commercial consequences.
At Lease Lawyer, our commercial property solicitors advise landlords and tenants across England and Wales on all aspects of the 1954 Act: assessing whether a lease is inside or outside its provisions, advising on the renewal procedure and time limits, negotiating terms on unopposed renewals, and representing clients where a landlord’s opposition to renewal is contested. If your lease is approaching expiry, or you have received a section 25 notice and are unsure what to do next, contact our team for clear, practical guidance on the options available to you.
Need advice on your right to renew under the Landlord and Tenant Act 1954?
The Landlord and Tenant Act 1954 can give business tenants security of tenure and the right to apply for a new lease when the contractual term ends. But those rights depend on whether the lease is protected, whether the tenancy was contracted out correctly, and whether key statutory deadlines are met.
Our commercial property solicitors advise landlords and tenants on lease renewals, section 25 notices, section 26 requests, contracting out, opposition grounds and renewal negotiations — so you understand exactly where you stand before valuable rights are lost.