7 Grounds of Opposition to a Commercial Lease Renewal

A tenant of a commercial lease has a statutory right to a lease renewal at the end of the contractual term if it satisfies criteria as per the Landlord and Tenant Act 1954 (LTA 1954). A landlord can oppose the tenant’s statutory right to a lease renewal on any of the 7 grounds set out in Section 30(1) of the LTA 1954.

A landlord must notify the tenant of its opposition to a renewal lease by notice. The notice must adhere to the following:

1. State that the landlord opposes the grant of a new lease and the specify the grounds on which its opposition is based on.
2. Specify a termination date no less than six months or more than 12 months after the notice is served, and no earlier than the contractual expiry date of the lease.

If the tenant were to serve a notice in accordance with section 26 of the Landlord and Tenant Act in its request for a new lease, a counter notice must be served within two months of receiving the tenant’s request and must specify the grounds of opposition the landlord is claiming.

A landlord can oppose the tenant’s right to a renewal on any of the grounds listed below:

1. Where, under the current tenancy, the tenant ought to not be granted a new tenancy in view of the state of repair of the premises, being a state resulting from the tenant’s failure to comply with the repair obligations under the lease. To satisfy this ground, the landlord must prove that the tenant has an obligation to repair and must prove that the premises are in disrepair.
2. If there has been persistent delay in paying rent. The landlord must prove that there have been arrears in rent. It is then for the tenant to persuade the court that it should be granted a new lease despite this.
3. If other substantial breaches of the obligations under the lease or if any other reason connected with the tenant’s use or management of the holding. The landlord must prove that there has been either a breach of the lease or a reason a new lease should not be granted connected with the tenant’s use or management of the premises.
4. The landlord has offered and is willing to provide or secure the provision of alternative accommodation for the tenant on terms that are reasonable having regard to the terms of the current tenancy. The responsibility is on the landlord to prove the alternative accommodation is suitable.
5. If the current tenancy was created by the sub-letting of part only of the property comprised in a superior tenancy. This ground requires that the existing tenancy must be an underletting of part out of a headlease interest, that the landlord who brings opposition must be the superior landlord, not the tenant’s immediate landlord, that the combined rent the superior landlord could achieve for the underletting of part must be substantially less than the rent achieve on the letting of the whole premises and that the superior landlord must require possession of the premises. The burden of proof is on the superior landlord to show the court that the requirements have been met.
6. If on the termination of the current lease, the landlord intends to demolish or reconstruct the premises, or a substantial part of the premises and that construction could not be carried out without obtaining possession. To satisfy the ground, the landlord’s intention to carry out the works and whether there is a reasonable prospect of carrying out the works needs to be considered. The obligation is on the landlord to prove it has the requisite intention to redevelop the premises.
7. If on termination of the current tenancy the landlord intends to occupy the premises for the purposes or partly for the purposes of a business to be carried on by him therein or as his residence. Who will actually occupy the premises, the extent of the occupation and the purposes of the business or residence all need to be considered. The responsibility is on the landlord to prove is has the requisite intention to occupy the premises.

The landlord can specify more than one ground of opposition. However, if they fail to specify a particular ground of opposition in its section 25 notice or section 26 counter-notice, the landlord will not be able to oppose a lease renewal on that ground at a later date. Once a ground of opposition has been specified, it cannot be changed for an alternative ground and further grounds cannot be added in later.

A tenant with security of tenure under the Landlord and Tenant Act is entitled to compensation if it does not obtain a new lease solely because the landlord has established a “no fault” grounds of opposition. These include the grounds listed 5, 6, and 7. It is therefore in the landlord’s interest to succeed on “fault ground”, being grounds listed 1, 2, 3, and 4. If the landlord successfully opposes the lease renewal on any of the “fault grounds”, the tenant will not be entitled to statutory compensation.

If you have any questions on the grounds of opposition for commercial lease renewals under section 30(1) LTA 1954, or you wish to discuss a related matter, contact Fareeda Malik.