Most commercial landlords are aware that tenants can apply for a new tenancy before their current tenancy comes to an end. The time frame for such an application is usually contained within the current tenancy.

The receipt of a Section 40(2) of the 1954 Landlord & Tenant Act Notice requiring information from and about the landlord is the first indication that a landlord is likely to receive that his tenant may be thinking of applying for a new tenancy. This form asks the landlord to confirm that he is the landlord and, if not, to inform the tenant who is the new landlord. Landlord's often ignore such a Notice at their peril as they are obliged to answer it.

The receipt of a Section 26 Notice informs the landlord of the tenant's request for a new tenancy under the Landlord and Tenant Act 1954. The Notice will contain details of the property, the date that the new tenancy is to begin and the proposed rent to be paid. The tenancy will also include any new terms to be contained in the tenancy.

Landlords must not ignore a Section 26 Notice. Strict deadlines are enforced with regard to a tenant's applications for a new tenancy. A landlord has only two months from receiving the request for new tenancy to notify the tenant that he is going to oppose it. The landlord can oppose the request for a new tenancy by filing a Counter Notice.

In a majority of occasions landlords will want to oppose the new tenancy as the terms contained in the Section 26 Notice are usually drafted for the benefit of the tenant. This is done as a negotiating tactic as most tenants expect the landlord to oppose the Section 26 Notice. Tenants also include provisions in their favour because occasionally a landlord will fail to oppose within the two month deadline and the tenant will get a new tenancy on the terms described in his Section 26 Notice. For that reason landlords must be vigilant in observing their incoming post for any Notices.

In order for a landlord to oppose a new tenancy he must satisfy one of the following seven grounds of opposition:

(a) Breach of repairing obligation.

The breach must exist at the date of the service of the Section 26 Notice and the breach must be so serious that the court "ought not" to grant a new tenancy.

(b) Persistent delay in paying rent

This will take into account conduct over a period of time providing the tenant cannot show good reason for the delay. There has been case law where a tenant has been two and half years late in paying rent but then became a regular payer again. In that instance he had a good reason for the delay and the court allowed a new tenancy. The critical issue is whether or not the tenant is likely to continue being a late payer.

(c) Other substantial breaches

Other substantial breaches can include circumstances where the tenant's use of the building is in breach of planning permission, or the landlord is unable to acquire fire insurance because of the tenant's activities.

(d) Alternative accommodation

If the landlord can provide secure suitable alternative accommodation and it is reasonable with regard to the current property and tenancy, the landlord may successfully oppose the tenant's application. In this situation the offer of the alternative accommodation should be made before the Notice of Opposition and the alternative property must be available at the date of the hearing.

(e) Sub-tenancy: The landlord wishes to re-let the property as a whole

The landlord may oppose if the tenancy created was a sub-tenancy of part of a property created in a superior tenancy and, the landlord has the reversion of the superior tenancy and, the rent recoverable for letting separately is far less than to let the whole property. However, the landlord must show that he wants the property but does not need to be in hardship to oppose a new tenancy. This ground is only available to the superior landlord.

(f) Intended demolition, reconstruction or substantial work of construction

In order for the landlord to succeed under this ground the landlord must prove that he seriously intends to do the work. Evidence of the landlord's intention can be proven by architects' drawings, commissions, raising capitol and the have been commissioned. The landlord must intend to do the work at the time of the hearing. However, the landlord cannot use this ground of opposition if he bought the interest in the property within five years of the end of the current tenancy.

(g) Landlord's intention to occupy the premises

The premises to be occupied must be the same as that occupied by the tenant. If the landlord wishes to renew the property he must rely on ground (f ) above.

The above grounds are quite complex and each matter will have to be decided on its own merits. Because of the restricted time deadlines described above it is essential that commercial landlords notify their solicitors as soon as they receive a tenant's Section 26 Notice. Failure to do so could result in the landlord being faced with a long tenancy on the tenant's terms.

Once the Counter Notice is successfully served on the other side another time limit starts to run. The tenant can then apply to the court for a new tenancy. The tenant must wait for the expiration of two months before he can apply to the court for new tenancy but must make the application within four months of receiving the landlord's Notice of opposition.

Serious negotiation often occurs during the two months after the landlord has filed the Counter Notice. If the matter is not settled within the two months the tenant will have to apply to the court for a new tenancy. The majority of matters are settled without the court having to make a final order and the parties will generally negotiate a commercial settlement to avoid the expense of court proceedings.

If you are in receipt of a tenant's request for a new tenancy please contact your solicitor as a matter of urgency. Please note that each case is different and the above information is only a general guide and should not be relied upon as conclusive instruction on how to proceed in a particular matter.