What Is A Section 25 Notice?
A section 25 notice is called after a section of the Landlord and Tenant Act 1954 (LTA) that specifies the information that a landlord must provide to a tenant (in the form of a notice) in order to terminate a commercial tenancy.
Whether the landlord is opposed to a new tenancy (i.e., wants the tenant to depart) or is willing to offer a new lease and wants to recommend terms, a s25 notice is required.
Commercial tenancies in England and Wales are covered by the LTA 1954, but not in Scotland.
The Two Forms Of Section 25 Notice
There are two types of section 25 notices:
A “friendly” notice that terminates the present lease but affirms the landlord’s willingness to enter into a new lease and specifies the terms the landlord will accept.
A “hostile” notice that terminates the current lease and opposes the renewal on one of the few grounds permitted.
A section 25 notice can be given for a minimum of 6 months and a maximum of 12 months in either scenario. These timelines must be taken into account when determining when to serve the section 25 notice to coincide with the lease’s end date.
What Are My Options As A Tenant
- If the tenant does not want to extend the lease, the solution is simple: do nothing and vacate the property by the section 25 notice’s termination date.
- No additional action is required if the tenant chooses to renew the lease and the parties achieve an agreement on lease terms before the section 25 notice expires (provided the new lease is completed by the required date).
- If the tenant intends to renew the lease, the landlord will not object to a new lease; however, because agreement on new lease conditions will not be reached before the section 25 notice expires, the tenant should apply to the Court for a new lease before the notice expires.
- If the parties cannot agree on new lease terms, the Court will assist them in reaching an agreement.
- If the tenant intends to renew the lease but the landlord objects, the tenant should apply to the Court for a new lease before the section 25 notice expires if the landlord has not previously filed to the Court for the termination of the lease. The Court will then assist in determining how and whether a new lease should be awarded.
Rent And Compensation
- If the tenant has applied to the Court for a new tenancy, the current tenancy will not cease when the section 25 notice expires, but will instead continue at the same rent for three months after the Court procedures are completed. During this time, either the landlord or the renter might request for a “interim rent.”
- If the tenant fails to get a new lease, compensation may be provided in certain circumstances. If you find yourself in this scenario, we can help you determine if you are entitled to compensation.
- Unless the tenant has been in the property for at least 14 years, the compensation provided will be the comparable sum to the ratable worth of the property.
How Is A Section 25 Notice Served
Check the lease terms because they will usually specify how all notices should be served, and if they are not followed, the notice will most likely be faulty.
Section 196 of the Law of Property Act 1925 will typically apply if there is no lease or if the lease is quiet on the question of service. The service is available via hand/personal delivery or recorded mail.
Serving Notice
If the landlord refuses to extend the lease, the notice must be issued between 6 and 12 months before the current tenancy expires. The date he sets for the end of the tenancy could be the lease’s final date or any subsequent date.
If the tenant has already received a section 26 notice, a section 25 notice cannot be served.
An s25 notice can only be withdrawn once the landlord has transferred his ownership to a new landlord who chooses to continue the tenancy on the same terms as before, or on new and different terms.
What Happens Once The Notice Is Served
When a section 25 notice is delivered, it usually prompts a negotiation with the tenant, either over the conditions of a new lease or over the landlord’s reasons for opposing a new tenancy and the validity of those reasons.
It is critical for tenants to pay attention to the deadline in the section 25 notice since the consequences can be severe.
The renter must do one of the following by the deadline specified in the section 25 notice:
- Have agreed to and negotiated a new lease with the landlord; or have agreed in writing with the landlord to extend the notice date; or
- Initiated legal action to get a new lease and a determination on its terms.
The tenant loses the right to occupy the premises and the right to a new lease if none of these actions are done.
The landlord or the tenant may initiate procedures for a resolution of whether a new lease will be granted and the terms of that lease earlier than 6 months (but only after 2 months after the service of the section 25 notice). In my experience, this is rarely done, but it is a viable alternative when time is of the essence and a decision must be taken quickly.
The Takeaway
It’s critical for landlords to understand their rights to terminate a new lease (once the current one expires) and to negotiate or oppose a new rent.
Leases will often simply roll over until a section 25 notice is served. It’s critical that the section 25 notice be correctly drafted and delivered, and that the tenant keeps track of the deadlines and takes prompt action to defend their position.
Click here to create your own Section 25 notice.
