This article explains the grounds set out as reasons to terminate a business tenancy under Section 25 of the Landlord and Tenant Act 1954.
Landlords and tenants can agree that Sections 24-28 of the Act will not apply to a lease.
This article is relevant only where that has not been done.
Introduction
To terminate a lease when its term expires, a landlord must serve notice and that notice must specify at least one of the grounds set out in section 25 of the Landlord and Tenant Act.
The process for ending a lease under s25 is explained in another article.
If your tenant serves notice asking for a new tenancy, you can oppose them only by using one or more of the same reasons.
There are seven grounds for ending a tenancy or for opposing a new tenancy. A landlord must choose one to support their application to court for possession.
If they choose a mandatory one (F or G) and they provide enough evidence to substantiate their claim, then the court must award possession regardless of the situation of the tenant. Furthermore, under a third ground (D), the court has little discretion not to order possession.
For applications on the four others, the court decides whether the tenant should be allowed to stay in occupation, even if the landlord proves their ground is reasonable.
If the court does award a new tenancy, it may be on terms that are not as favourable to the landlord as they might be able to negotiate in an out of court settlement. The court will generally rule that:
- The term of the lease will be fixed for up to 14 years. The landlord will not be able to serve notice to quit until the lease has ended.
- The rent to be ordered is that at which the premises might reasonably be expected to be let on the open market.
So it is important that the landlord chooses the strongest ground and collects all the evidence necessary to prove it valid.
The importance of following the correct procedure
The procedure for serving notice to quit using a Section 25 form is set out in the Act.
Time limits are critical. If the procedure is not followed, or if the deadlines for action are missed, the landlord’s case may be dismissed.
There is a prescribed format to the forms, so the words should not be changed.
A form is in two parts: the notice and the notes for the tenant.
You must be sure to serve the notes with the notice part of the form. If you do not do so, your notice will be invalid.
The tenant must also respond within a set time and as set out in the Act.
Grounds for objection to the renewal of a lease
These are the reasons under which the landlord may object to the application for a new tenancy. They are listed in section 30(1) of the Landlord and Tenant Act 1954.
Ground A: Breach of repairing covenant
This is a discretionary ground.
Proof of the tenant's failure to keep the premises in good repair does not alone entitle the landlord to have the tenant's application dismissed.
The landlord must show that the tenant ought not to be granted a new tenancy in view of the state of repair of the premises.
The court may take into account an offer by the tenant that the new tenancy should contain a covenant obliging the tenant, immediately to repair the premises as the original lease required.
Ground B: Persistent delay in paying rent
This is a discretionary ground.
The landlord must show that the tenant ought not to be granted a new tenancy in view of its persistent failure to pay the rent at the time stated in the lease.
The court's main consideration will be whether the landlord will be able to rely on the tenant to pay the rent promptly in the future
Note: in a case in 2002, the Court of Appeal held that a landlord who habitually accepted the late payment of rent from a tenant and the tenant's failure to comply with his repairing obligations, was not permitted to insist on strict compliance with the terms of the lease unless and until the tenant was given clear and reasonable notice that the landlord now required strict compliance.
In this case, the current landlord was an assignee of the property. It was the previous landlord who had accepted the lackadaisical approach by the tenant. The new landlord was obliged to tell the tenant that he required compliance before he could complain to the court and apply for possession. The tenant's application for a new lease was, therefore, granted.
Ground C: Breaches of other obligations
This is a discretionary ground.
The landlord must show that the breaches are such that the tenant ought to be deprived of a new tenancy
Any waiver of, or acquiescence in, a breach by the landlord will influence the court against the refusing of a new tenancy on the grounds of the breach.
The court will consider all the circumstances surrounding the breach and the past conduct of the tenant.
Ground D: Availability of alternative accommodation
The Court has little or no discretion.
The landlord must show that they have offered suitable alternative premises to the tenant on lease terms that are reasonable in the round.
Note: the tenant may have to think quickly on this one, because if they fail to accept an offer that the court upholds, then they will be out, with no premises anywhere. They are advised to apply to the court for an undertaking from the landlord to provide specific premises, available for inspection by the tenant, before the court makes any order refusing the grant of a new lease.
Ground E: Sub-tenant - possession required for letting or disposing of whole of property
This is a discretionary ground.
The landlord must show that the tenancy was formed by sub-letting part of the superior tenancy and the superior landlord is able to let the whole premises for more than the parts.
This is conditional on proof by landlord that the superior tenancy will have come to an end by the date on which the applicant's current tenancy is due to terminate.
Ground F: Landlord intends to demolish or reconstruct
This is a mandatory ground.
The landlord must show that they intend either to demolish or to reconstruct the premises comprised in the holding or a substantial part of those premises, or to carry out a substantial work of reconstruction which they could not reasonably perform without obtaining possession of the premises.
The landlord must be genuine in their intention with firm plans.
It is more likely that the court will be convinced if the premises are old and becoming dilapidated.
Ground G: Landlord intends to occupy the premises themselves
This is a mandatory ground.
The landlord must show that they intend to occupy the premises for the purposes of their own business, or as their residence.
The landlord must have owned the premises for at least five years before the termination of the current tenancy.
Compensation
The Landlord and Tenant Act 1954 states that the tenant is entitled to compensation if a new tenancy is refused because the landlord:
- requires possession of the property for letting or disposing of the property as a whole (Ground E)
- intends to demolish or undertake major reconstruction (Ground F)
- intends to occupy the premises for his own business or residence (Ground G)
Evidence
Because the landlord's choice of ground is so important, they are advised to collect evidence together before serving the notice.
Examples of useful documentary support are:
Ground A
Schedule of dilapidations showing the condition of the premises, the work required to remedy it and the covenant of which the tenant is allegedly in breach.
Ground B
Schedule of the payment history in respect of rent.
Ground C
Schedule of the covenants of which the tenant has been in breach and details of the breach or breaches complained of.
Ground D
Description of the alternative accommodation, which the landlord intends to provide; or better still, details of the particular property.
Ground E
Full detailed calculations of the level of the rent which the Landlord maintains is obtainable on a letting of the whole and of the individual parts together with an explanation showing when the landlord will obtain vacant possession of the remainder of the building.
Ground F
Description of the works that the landlord intends to undertake.
If planning consent is required, whether it has been obtained and, if not, when it is expected.
When the landlord intends to start the work.
A necessary explanation of the landlords position with regard to adjacent land or consents that might be needed for the scheme.
Evidence that the landlord has the financial ability to complete the scheme.
Ground G
Description of the business that the landlord intends to carry on at the premises.
Useful documents
Net Lawman offers all the business property notices in template form to end, to renew or to object to renewal of a lease.
If you subsequently renew the lease, our standard business lease agreements cover every letting scenario and are perfect for most landlords.