The Landlord and Tenant Act 1954 applies to commercial tenancies throughout England and Wales. A Section 25 notice is named after the section in the Landlord and Tenant Act 1954 which includes the information that a Landlord needs to provide to the Tenant in order to end the business tenancy.
Security of Tenure gives the Tenant the right to be offered a new tenancy at the end of the term. This right was founded in The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003. It applies to tenancies unless the Landlord and Tenant agreed to opt out of sections 24 – 28 of the LTA 1954 at the start of the Lease.
If a Landlord would like the Tenant to leave at the end of the term or they wish to grant a new Lease on new terms, then a Section 25 notice must be served within 6 to 12 months before the Landlord wants the tenancy to end. There are two types of Section 25 notice the Landlord could serve. As mentioned, one suggests a new tenancy on different terms and the other initiates termination of the tenancy. The Landlord can oppose a tenancy on seven grounds (A-G) which are stated in Section 30(1) of the LTA 1954. These include the Tenant being in arrears of rent, the Tenant not complying with their obligations, the Landlord wishing to occupy the premises or redevelop the premises.
Where the Landlord serves a Section 25 notice opposing a new tenancy then the Tenant could be entitled to compensation if it is on the grounds of E, F or G of Section 30 (1) of the LTA 1954. Statutory compensation is calculated on the rateable value of the premises. If the Tenant has been in occupation for over 14 years, the compensation is twice the rateable value. For under 14 years the compensation is one times the rateable value.
If the Tenant does not respond to the Section 25 notice, then the tenancy will either continue on the Landlord’s proposed new terms or the tenancy will end on the specified date.
Either the Landlord or the Tenant can suggest a new tenancy. If the Tenant wishes to request a new tenancy, they would serve a Section 26 notice within 6 to 12 months of the end of the term. If the Landlord opposes the request, they must respond within 2 months with a counter notice, specifying the grounds in which it is opposed. However, if the Landlord has already served a Section 25 notice, the Tenant cannot serve a Section 26 notice but instead would have to reply to the Landlord. Similarly, a Section 25 notice cannot be served on the Tenant if the Tenant has already served a Section 26 notice.