For most small businesses, the premises are part of the business itself. Customers know where to find you, staff know the commute, and suppliers know the delivery address. So the question that matters eighteen months before your lease expires is not whether you like the premises, but whether you have the legal right to stay in them, and on what terms.
In England and Wales, most business tenants do have that right. It is called security of tenure, and it comes from Part II of the Landlord and Tenant Act 1954. This guide explains it from the tenant’s side: whether your lease is protected, how the renewal procedure works, what happens to the rent, and what to do if your landlord wants you out.
Security of tenure in plain English
Security of tenure means that when your contractual lease term ends, your tenancy does not simply end with it. Instead, it continues on the same terms until either you or your landlord follows the statutory procedure to bring it to a close or to agree a new lease. You also have the right to apply to the court for a new lease, and your landlord can only oppose that application on limited statutory grounds.
Three conditions must be met for the protection to apply. First, the tenancy must be of premises occupied for business purposes. Second, the term must generally be more than six months, although a tenancy can also gain protection where there is no formal lease but a tenant has occupied commercial property and paid rent for more than six months. Third, and most importantly, the lease must not have been contracted out of the 1954 Act.
Contracting out is the trap. Before granting a lease, a landlord can ask the tenant to agree to exclude sections 24 to 28 of the Act, following a prescribed procedure that includes a warning notice and, usually, a statutory declaration. If that procedure was followed, the lease is outside the Act: it ends on its expiry date, and you have no automatic right to renew. Before you plan any renewal, dig out your lease and check whether it was contracted out. If you cannot tell from the document, ask your solicitor to confirm. Everything that follows in this guide assumes your lease is inside the Act.
The two statutory notices: Section 25 and Section 26
Renewal under the 1954 Act runs on formal notices with strict timing rules. Getting the form or the date wrong can invalidate the whole process, so treat these notices seriously.
A Section 25 notice is served by the landlord. It specifies a termination date not less than six months and not more than twelve months after service, and it does one of two things: it proposes terms for a new lease, or it states that the landlord opposes a new lease on one or more of the statutory grounds. If you receive a Section 25 notice, take legal advice immediately, because missing the deadline to respond can cost you your security of tenure.
A Section 26 request is served by the tenant. You can serve it at any time on or after the first day of the final year of your contractual term, and it must state the terms you propose for the new lease, including the length of term and the proposed rent. The termination date you specify must also be not less than six months and not more than twelve months after service, and no earlier than the date the lease would ordinarily have ended. You cannot serve a Section 26 request if your landlord has already served a valid Section 25 notice, so timing matters: the first valid notice served controls the process.
The seven grounds on which a landlord can oppose renewal
A landlord cannot oppose renewal simply because it wants a different tenant or a higher rent. It must rely on one or more of the seven grounds in Section 30 of the Act. In summary, they are: failure to comply with repairing obligations; persistent delay in paying rent; other substantial breaches of the lease; provision of suitable alternative accommodation by the landlord; the landlord’s requirement to dispose of the leased premises as a whole; the landlord’s intention to demolish or reconstruct the premises; and the landlord’s requirement to occupy the premises for its own business purposes.
How the new rent is set
Rent is the term most tenants worry about, and it is the term most often negotiated. If you and your landlord cannot agree, the court will set the rent at the open market rental value, having regard to the terms of the new lease, the state of repair, and the permitted use. The court disregards the effect of any goodwill you have built up, any improvements you made at your own expense, and any effect of your own occupation on the value. In practice, that means you do not pay rent on the value of the business you built in the premises.
The tenant’s renewal countdown
Twelve months before expiry, confirm whether your lease is inside or outside the Act, and review the current rent against market evidence. Nine months before, decide your strategy: renew, relocate, or negotiate a shorter holding position. If you want to renew, consider serving a Section 26 request early in the final year, which puts you in control of the timetable. If you would rather leave, remember that a tenant wishing to terminate a business tenancy must give not less than three months’ notice, with a termination date no earlier than the date the lease would ordinarily have ended.
Six months before expiry, open negotiations on the key commercial terms, not just rent: term length, break clauses, repairing obligations, service charge caps, and any rent-free period for refurbishment. Three months before, if terms are not agreed, make sure a court application has been made before the termination date specified in the notice, because missing that deadline can end your right to a new lease. Throughout, keep your rent payments up to date and comply with repairing obligations, because breaches in the final year are the easiest grounds for a landlord to use against you.
Negotiating terms beyond the rent
Renewal is your best opportunity to fix the lease problems you have lived with for years. If your current lease makes you responsible for the structure and roof of an old building, negotiate that down to interior-only repair. If the service charge has crept up without explanation, seek a cap or a fixed charge. If you need flexibility, ask for a tenant’s break clause at year three of a five-year term, or a shorter term with an option to renew. Landlords often concede on these points more readily than on rent, because they cost less in headline terms.
Dilapidations also belong in the renewal negotiation. If you stay on under a new lease, the old lease’s terminal dilapidations claim does not automatically disappear, so raise it early and seek to have it released or rolled into the new lease terms. Our dilapidations guide explains how the Section 18 cap limits what a landlord can recover, and why a schedule of condition matters at renewal just as much as at first signing.
When walking away is the right answer
Renewal is a right, not an obligation. If the rent the landlord wants makes the premises unviable, if the building needs repairs the landlord will not fund, or if your business has outgrown the space, leaving may be the better commercial decision. Before you decide, cost the alternatives honestly: fit-out costs at new premises, disruption to customers, and the loss of goodwill tied to the location, against the rent saving. A tenant who can credibly walk away negotiates better than one who cannot, so keep your relocation options genuinely open until terms are agreed.
Frequently asked questions
Does security of tenure apply in Scotland or Northern Ireland?
No. The Landlord and Tenant Act 1954 applies in England and Wales. Scotland and Northern Ireland have different regimes for business tenancies, so take local advice if your premises are outside England and Wales.
Can my landlord increase the rent as much as it likes at renewal?
The landlord can ask for any rent, but if you cannot agree, the court sets the rent at open market value, disregarding your goodwill and your own improvements. An asking rent far above market evidence rarely survives a court determination.
What happens if neither side serves a notice?
The tenancy continues on its existing terms under statutory continuation, and the rent remains payable as before, subject to any rent review in the lease. That holding position can continue indefinitely until a notice is served, but it leaves both sides uncertain, so it is rarely a good long-term plan.
The bottom line
Security of tenure is one of the most valuable rights a small-business tenant holds, and it is easily lost by inattention to deadlines. Check whether your lease is inside the Act, diarise the twelve-month countdown, respond to any Section 25 notice immediately, and negotiate the new lease as a fresh deal, not as a continuation of the old one. Tenants who prepare early, pay rent on time, and negotiate with market evidence usually renew on terms they can live with, and landlords who know the tenant understands its rights tend to offer realistic terms in the first place.
Related reading: Hidden Costs of Renting Commercial Property and Commercial Lease Key Terms Explained.