What is a Section 26 Notice?
Section 26 refers to the Landlord & Tenant Act 1954. This section of the Act states how a tenant may end a business tenancy and sets out the information (in the notice) that a tenant needs to give the landlord in order to surrender the lease validly.
The LTA 1954 applies to commercial tenancies in England and Wales, but not in Scotland.
Security of tenure and the right to have the lease renewed
The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 changed the rights of tenants, giving what is known as security of tenure. We have a much longer article on security of tenure, but in brief, it is the right of the tenant to be offered a new tenancy at the end of an old one.
There are situations where a tenant does not have security of tenure. The most common is where the landlord and the tenant have agreed before the start of the lease to opt out of Sections 24 to 28 of the LTA 1954 and have followed the correct procedure. If the parties have opted out, then a Section 26 notice is not suitable and the arrangements for ending and renewing the tenancy should be set out in the lease.
Otherwise, if the parties haven't contracted out beforehand, either the landlord or the tenant can suggest a new tenancy. The landlord does so using a Section 25 notice, and the tenant does so using a Section 26 notice.
Either party can find out certain information before doing so by issuing a Section 40 notice to the other.
Landlord's right to challenge a renewal
The landlord cannot refuse a new lease unless they have a sufficiently valid reason - if so, they can challenge the tenant's request on one of the seven grounds. Examples are, if the tenant has consistently failed to pay the rent or if the landlord wishes to develop the property.
The landlord must respond to a Section 26 request within two months of receipt if they wish to oppose the grant of a new tenancy.
Pre-empting the landlord's notice
The tenant can pre-empt the landlord sending a Section 25 Notice (the landlord's equivalent of a Section 26 notice), to request a new tenancy and propose terms for renewal.
The tenant must send notice between 6 and 12 months before they want the new tenancy to start and the new start date must be after the initial lease has expired.
However, if the landlord has already sent a Section 25 notice, then the tenant cannot propose a new lease using a Section 26 Notice, and must instead reply to the landlord on the landlord's s25 form.
Renewal of the lease
Where both parties are willing to renew the lease on the tenant's proposed terms the new tenancy can begin on the date specified in the notice.
Alternatively, the parties may need to negotiate different terms for a settlement, or, if the landlord is opposing renewal, either party may apply to the court. The court will either uphold the landlord's opposition or order the grant of a new tenancy and settle the terms upon which the parties cannot agree.
Interim rent
Under Section 24B of the LTA 1954, if a Section 26 notice has been served by the tenant, interim rent is payable from the earliest date that could have been specified in the notice as the commencement date of the new tenancy.
Right to acquire the freehold
Sometimes the tenant may be entitled to acquire the freehold or an extended lease. If so, then Form 7 in Schedule 2 to the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004 must be used instead of a s26 form.