Understanding a Section 25 Notice in Commercial Leases: Grounds and Key Considerations

As a business owner, you may have received a Section 25 Notice from your landlord and are wondering what it is and how you, as a tenant, should respond. Whether you’re a seasoned business owner or this is your first commercial venture, understanding the implications of this legal notice is essential.

What is a Section 25 notice (commercial lease)?

A Section 25 notice (sometimes referred to as an S25 notice) is a formal notice from a landlord to their tenant of a commercial property. Most business tenancies are granted certain protections by the Landlord and Tenant Act 1954. This provides commercial tenants with security of tenure, which means that landlords cannot simply evict them without good reason, and tenants have the right to request a new lease in certain circumstances. This can apply even if the original duration of the lease has come to an end but you are still trading from the premises.

The Section 25 notice must specify the date it is issued and the date the tenancy is intended to end. Your landlord must give you at least 6 months’ notice, and the end date cannot come before the date your lease would have otherwise expired. For example, if your lease is due to end on 20th July 2025 and your landlord wanted the tenancy to end on that date, your landlord would need to serve a Section 25 notice on 20th January 2025.

Why has my landlord given me a Section 25 notice?

As the lease approaches its natural end, a Section 25 notice is the landlord’s way of formally notifying you of their intentions moving forward. The main reasons why a landlord might serve a Section 25 notice are as follows:

• Non-renewal: The landlord may not want to continue with the tenancy for various reasons, such as plans for redevelopment, a change in business strategy, or to occupy the property themselves. They may also serve a Section 25 notice if you have been persistently late in paying rent, substantially breached the lease, or not maintained the condition of the property as required under your lease.
• Proposing new terms: The landlord may propose different terms for a renewal lease, such as a higher rent, a shorter or longer lease duration, or alterations to other lease conditions.

What should I do?

Receiving a Section 25 notice can be unsettling, but there are several steps you can take. It’s important to act promptly, as there are strict timescales involved.

1. Read the Notice Carefully

Ensure you understand the notice’s contents and whether it is seeking to terminate the lease, or suggest new terms. Pay particular attention to the following:

• Check the date when the landlord intends the lease to end. The landlord must give at least six months’ notice, and cannot be served more than 12 months before the end of the lease.
• If the landlord is proposing new terms, these will be outlined in the notice. Make a note of any changes to rent, lease duration, or other terms that are important to you and your business.

2. Consider Negotiating with Your Landlord

In many cases, landlords and tenants can negotiate the terms of a lease renewal. If you would prefer to stay in the property but the landlord has proposed higher rent or other changes, it might be possible to reach a mutually agreeable solution.

Negotiating directly with the landlord may help you avoid costly litigation and reach an outcome that works for both parties.

3. Seek Legal Advice

Because commercial leases are complex, one of the most important steps you should take is to seek legal advice from a solicitor experienced in commercial property law. Our solicitors can:

• Review the Section 25 notice to ensure it complies with legal requirements;
• Advise you on whether the landlord has the legal right to terminate the lease or impose any proposed changes;
• Guide you through the process of negotiating with the landlord or challenging the notice (if necessary); and
• Depending on the ground of opposition, advising you on whether you are entitled to compensation or an alternative venue from your landlord.

4. Apply to Court

If you and your landlord cannot reach an agreement, you may need to take the matter to court. This may be necessary if:

• The landlord is trying to evict you without a legally valid reason; or
• You cannot agree on the terms of the renewal lease.

An application to the court must be made before the deadline set in the Section 25 notice. The court will decide whether to grant a new lease and, if so, on what terms. Alternatively, the court may grant your landlord possession of the premises, meaning you would need to relocate your business.

What Happens When Section 25 Notices expire?

If the Section 25 notice deadline runs out and the lease is not renewed, you may be required to vacate the premises. This can have significant implications for your business, including the need to relocate, the costs of moving, and the potential disruption to operations.

If you decide to move out, be sure to:

• Find alternative premises early to avoid disruption and arrange for professional movers;
• Settle any outstanding rent and other obligations.
• Ensure the property is in good condition to avoid extra costs or disputes over disrepair.

Final Thoughts

Being served with a Section 25 notice is a serious matter for any commercial tenant, but it doesn’t have to mean the end of your business. With the right legal advice and proactive steps, you can protect your business interests and secure the best outcome. The key is to take legal advice promptly, understand your rights and how to appropriately respond to the Section 25 notice, and engage with the landlord in a professional and constructive manner.

If you’re facing a Section 25 notice or other commercial lease issues, or you would like to find out more about section 25 notice grounds, our solicitors are on hand to advise you and help protect your business interests. By calling us on 01273604123 and taking this step, you can provide your loved ones with financial security and peace of mind when they need it most. You can also reach us by email at enquire@bbc-law.co.uk or make an enquiry.