Commercial lease contract: lease termination models

Do you want to end a commercial lease? And what are the different notices you need to serve?

If you don’t know where to start, our guide (created with legal aid specialists Farillio) covers the Landlord and Tenant Act 1954 and some of the scenarios you might face.

Commercial Lease Agreement: Free Lease Termination Templates

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What happens when a commercial lease expires?

This guide (and the templates above) covers what you need to do if you or your tenant wants to end a commercial lease after it expires.

If your tenant wants to end the lease sooner, this is called an abandonment of the lease. You should research your options in this scenario and seek specific legal advice.

The 1954 law

Automatic protections are in place for tenants under the Landlords and Tenants Act 1954 (the 1954 Act). Business owners should be aware of this, and we’ll cover them before we explain the specific sections of terminating the lease.

The 1954 law gives your tenants the right to:

  • remain legally in the premises, using the same conditions as their existing lease (when it expires), and

  • ask the court for a new lease if you cannot agree on the conditions (called “security of tenure”)

For more control over your property and the end-of-lease conditions, you can exclude these rights or accept new ones. However, this requires a formal process supplemented by notices and statements, so that the tenant understands the rights they are waiving.

Termination of a commercial lease

Assuming you have not decided to exclude your tenant rights (see above), and these are protected as usual, your commercial lease will continue until its end in an authorized manner. by the 1954 law.

Your tenant can decide that once their lease expires, they no longer want to stay. If they decide to do so before the end of the contract and they have left the premises, your lease ends naturally, in accordance with the agreement you have in place.

If they stay on the premises and then decide to leave after the end date, they will need to give you three months notice using a Section 27 Notice (see below). You will start an “unlimited rental” for this period.

Notice article 25 (lessor terminating the commercial lease)

You can notify your tenant of your intention to end their tenancy by way of a section 25 notice (sometimes called Notice S25). This confirms :

  • the end date of your current lease

  • that you will not oppose a renewal, or

  • that you do not wish to renew, for reasons that you have legally defined

Cancel a commercial lease? Use the section 25 notice template to get the ball rolling.

The wording of this template is statutory, so do not change it unless you add the required information. You will also need to include any notes that accompany the template or your review will not be valid.

Article 25 time limits

Strict deadlines apply to a section 25 notice. You must serve it between six and 12 months before the end of your contractual term. And if your tenant has already given you notice to renew the lease (see notice article 26 below), you cannot serve it.

If your lease is already in its last six months (or has expired), you will still need to provide at least six months notice.

What if your tenant does not want to terminate the lease?

If you’ve served a Section 25 notice but your tenant wants to stay, here are the legal steps you need to take:

  1. Serve Section 25 Notice, Using Registered or Special Delivery

  2. If they don’t want to leave, your tenant will need to send you a ‘counter notice’, using the format prescribed in your section 25 notice notes (included in our section 25 notice template)

  3. Try to negotiate a compromise

  4. If you cannot agree, you will need to apply for a court order giving you the right to take possession of the property.

  5. Your tenant can choose to make a counter-request to the court (request a new lease), and the court will make a final decision

Going this far is costly for all parties, and often landlord and tenant come to an agreement along the way. Some landlords offer a financial incentive (eg one month’s rent free) in exchange for a quick resolution.

Notice of article 26 (the tenant requests a new lease contract)

If your tenant wishes to stay and you have not issued a section 25 notice (see above) to terminate the commercial lease, they can submit a request for a new lease. This is known as a section 26 notice or Notice S26. Again, it’s written in statutory wording, required by law.

The annex that accompanies the notice under section 26 allows your tenant to define the conditions he wants for the new lease. If you cannot agree to these terms, a court can step in and make the decision for both of you.

Your tenant can use the section 26 notice template for this, but remember they should only edit it to add the required information.

Notice of article 27 (termination by the tenant of the lease contract after expiry)

If your tenant stays in the premises and decides they want to leave only after the contract expires, they will need to give you three months’ notice with Section 27 notice (sometimes called a Notice S27).

You can give them the section 27 notice template to help them with this task. The wording is much less formal than in the section 25 notice template, but they should send it to you with their intentions clearly stated in a letter format by registered mail.

Once a section 27 notice is served, it is irrevocable. Your tenant will not have the legal right to remain in the premises after the date of termination.

If your tenant has served you with a section 26 notice (see above) to renew the lease, they cannot send a section 27 notice to “cancel” this. However, they can serve a section 27 notice to come into force after the end of the section 26 notice.

What happens if I do nothing?

Unless you have terminated the tenancy with one of these notices, it continues under the same conditions as the original lease. The rent will also be fixed at the amount paid before the date of contractual termination.

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