A commercial lease fixed term ending does not always mean your business has to move out. Whether you are a tenant deciding what to do next or a landlord planning ahead, the first question to answer is whether the lease is protected by the Landlord and Tenant Act 1954 or has been validly contracted out. This guide explains what happens at lease expiry, your renewal rights, notice deadlines and the end of term costs to plan for.
When a fixed term commercial lease reaches its expiry date, what happens next depends heavily on whether the tenancy has security of tenure under the Landlord and Tenant Act 1954. A protected tenancy can continue under section 24 and may carry a right to a new lease. A validly contracted out lease normally expires without an automatic statutory right to renew.
That one distinction can completely change the legal position of both the landlord and the tenant.
A commercial lease fixed term ending can lead to renewal, statutory continuation, a negotiated surrender or the tenant simply leaving, depending on the lease and the Landlord and Tenant Act 1954. If the tenancy is protected, section 24 can continue it beyond contractual expiry. If it has been validly contracted out, it normally ends on the agreed date.
Picture a lease that reads as follows:
Term: 5 years
Start: 1 November 2021
Contractual expiry: 31 October 2026
31 October 2026 is the end of the contractual fixed term. But that date on its own does not tell you whether the tenant has to hand back the keys. You have to establish whether Part II of the 1954 Act applies, because that is what decides whether the tenancy continues or comes to an end.
A protected business tenancy benefits from the security of tenure regime under Part II of the Landlord and Tenant Act 1954, subject to the statutory requirements. A contracted out tenancy has had those renewal protections validly excluded before the lease was granted, meaning the tenant normally has no statutory right to remain or to obtain a new tenancy at expiry.
| Issue | Protected Lease | Contracted Out Lease |
|---|---|---|
| Ends automatically at contractual expiry? | Generally no | Generally yes |
| Statutory continuation possible? | Yes | No statutory continuation |
| Statutory renewal right? | Potentially yes | Generally no |
| Section 25 procedure relevant? | Yes | Not for statutory renewal |
| Section 26 request available? | Potentially yes | Generally no |
Most business tenants potentially have renewal rights unless a specific exclusion or exception applies. For a fuller explanation, see our guide to the difference between a business tenancy and a commercial lease and our page on Landlord and Tenant Act 1954 advice.
Where Part II of the Landlord and Tenant Act 1954 applies, section 24 provides that the tenancy does not simply come to an end because the contractual fixed term has expired. Instead, it continues under the statutory regime until it is brought to an end in accordance with the Act or by another recognised method.
The tenant is not occupying without legal rights. Section 24 is continuing the protected business tenancy, which gives the parties time to negotiate a renewal or to use the statutory procedure. You can read the framework in full in the Landlord and Tenant Act 1954, Part II.
A protected tenancy continuing under section 24 broadly continues on the existing terms while the renewal position is resolved. Rent, service charge, insurance rent and the usual lease covenants still apply, but you should not assume that every financial or procedural point stays permanently frozen, because the statutory process can affect matters such as interim rent and the eventual terms of a new tenancy.
While holding over, the tenant should keep complying with its obligations, including:
Holding over is not a rent free extension. If you would like help understanding what your lease requires of you, our commercial tenant advice solicitors can review your position.
A Section 25 notice is the statutory notice a landlord can serve under the Landlord and Tenant Act 1954 to start the termination or renewal process for a protected business tenancy. The notice must state whether the landlord is willing to grant a new tenancy or intends to oppose renewal on statutory grounds.
Under section 25, the termination date in the notice is generally subject to a 6 to 12 month notice period. A landlord may therefore serve either:
How a notice is framed makes a real difference to what happens next. Our lease renewal opposition solicitors advise both landlords and tenants on these notices.
A Section 26 request allows a qualifying business tenant to start the statutory renewal process and ask for a new tenancy. The tenant proposes the property, the rent and the other terms it wants. The proposed start date must generally fall between 6 and 12 months after the request and cannot precede the relevant contractual termination date.
A Section 26 request can be a useful strategic step where a tenant wants to move renewal discussions forward rather than waiting on the landlord. It must be prepared carefully, though, because an incorrect date or a procedural slip can create significant complications. A qualifying tenant can also apply to the court for a new tenancy where agreement cannot be reached.
Yes, but a landlord cannot simply refuse renewal because it would prefer a different tenant. Where the 1954 Act renewal regime applies, opposition generally has to rely on one or more statutory grounds, such as specified tenant defaults, qualifying redevelopment or the landlord intending to occupy the premises itself. The precise requirements vary according to the ground relied upon, and a landlord proposing redevelopment will need to satisfy the applicable statutory test.
The renewal position should therefore be assessed early where either party expects disagreement. Our guide to statutory lease renewal advice explains how the process works in practice.
Not in every situation. For a protected fixed term tenancy, section 27 of the Landlord and Tenant Act 1954 contains specific rules about preventing or ending statutory continuation. A tenant that remains in occupation after the contractual expiry date will generally need at least three months written notice to end a tenancy continuing under section 24, but the position at the original expiry date is different.
Section 27 provides that section 24 will not apply where the tenant is not occupying the property at the time the fixed term would otherwise expire. It also allows a tenant to give written notice, no later than three months before contractual expiry, that it does not want the tenancy continued. Once a fixed term tenancy is already continuing under section 24, the tenant can bring it to an end by giving at least three months written notice.
In other words, do not apply the three month rule indiscriminately to every lease expiry. If you are weighing up your exit, our lease exit options solicitors can help you work out what your lease actually requires.
A commercial lease validly contracted out of the Landlord and Tenant Act 1954 normally ends when its contractual fixed term expires. The tenant does not benefit from section 24 continuation or an automatic statutory right to a new lease, so any renewal has to be agreed before expiry if continued occupation is intended.
Lease expires: 31 October 2026
Lease validly contracted out: Yes
New lease agreed: No
A tenant in that position should not assume it can simply stay on indefinitely after 31 October. If both sides want the tenant to remain, the renewal documentation is best dealt with before expiry. You can find out more in our guide to security of tenure and contracting out or our overview of protected tenancy advice.
Remaining in occupation after a contracted out lease expires can create legal uncertainty. The status of the occupation will depend on the parties' conduct, their communications, the rent arrangements and the surrounding circumstances. A tenancy at will, a periodic tenancy or another form of occupation may potentially arise, so both landlord and tenant should document what they intend.
This can be particularly awkward where the landlord wants any future tenancy to remain outside the 1954 Act. Simply accepting rent without thinking through the legal consequences can create unnecessary uncertainty. Where negotiations will continue after expiry, it is worth taking advice on the right interim arrangement rather than leaving it to chance.
Yes, and in many cases negotiating early is the most practical approach. Landlord and tenant can discuss the new rent, lease length, break clauses, repairing obligations, service charge, permitted use and other terms before expiry, which allows the new documentation to be completed without unnecessary uncertainty or interruption to the business.
A tenant should ideally start reviewing its options well before expiry. Useful questions to ask include:
Our commercial lease renewal and extension solicitors regularly handle renewals from the first heads of terms through to completion.
The rent under a renewed commercial lease is not automatically the same as the previous rent. The parties may negotiate it, and where statutory renewal proceedings are needed the Landlord and Tenant Act 1954 contains provisions dealing with the terms of the new tenancy and the rent. Valuation evidence can therefore become important.
This matters most where market conditions have shifted significantly since the original lease was granted. Tenants should not assume the old rent equals the new rent, and landlords should not assume that a proposed increase will simply be accepted. A commercial property surveyor may assist with rental valuation and negotiations. You can read more in our guide to open market rent review and our page on rent review services.
Lease expiry does not make repairing obligations disappear. The tenant may have obligations covering repair, decoration, reinstatement of alterations and yielding up the premises. Where those obligations have not been met, the landlord may pursue a dilapidations claim, subject to the lease and the applicable legal principles.
This can become one of the largest costs of leaving commercial premises. Typical items include:
Review these obligations months before expiry rather than in the final week. Our page on full repairing and insuring obligations explains what an FRI lease typically requires, and our dilapidations claims solicitors can advise on both sides of a claim.
A Schedule of Dilapidations identifies alleged breaches relating to matters such as repair, reinstatement, decoration and legal compliance. It may set out remedial works and estimated costs. At lease end, the landlord may use the schedule and a Quantified Demand as part of pursuing a financial claim against the former tenant.
RICS guidance recommends early involvement of a suitably experienced building surveyor where dilapidations are likely, and the RICS dilapidations guidance is a useful reference point. Tenants should not automatically accept every item or figure in a landlord's schedule. The claim needs to be considered against:
A rent deposit is not necessarily returned automatically on the expiry date. The rent deposit deed should be checked, because the landlord may be entitled to retain money temporarily or make permitted deductions for outstanding liabilities. The balance should normally be returned once the contractual conditions for release have been satisfied.
Outstanding amounts can include rent, service charge, insurance rent, interest and other recoverable sums. Repair claims may also be relevant depending on how the deposit documentation is worded, so do not budget for the return of your deposit until the lease terms have been checked.
If you are facing a disputed demand, our rent and service charge advice solicitors can help you work through what is properly owed.
A tenant approaching commercial lease expiry should start planning early. Establish whether the lease is protected by the 1954 Act, decide whether the business wants to remain, review potential exit liabilities and take advice before serving or responding to statutory notices. Early preparation usually gives the tenant more options and more negotiating time.
| Stage | Actions |
|---|---|
| 12 months before expiry | Confirm the contractual expiry date; check whether the lease is protected or contracted out; review any Section 25 notice already received; decide whether the business wants to stay; review alternative properties; obtain rental valuation advice if appropriate. |
| 6 to 12 months before expiry | Consider a Section 26 strategy where applicable; start renewal negotiations; review repair obligations; commission a dilapidations assessment if useful; review alterations requiring reinstatement; negotiate heads of terms. |
| 3 to 6 months before expiry | Finalise the renewal or exit strategy; check statutory notice requirements; plan repairs and reinstatement; review the service charge position; review rent deposit arrangements; arrange relocation if leaving. |
| Before the final day | Complete agreed repairs; remove required fixtures and belongings; return keys where leaving; record the condition of the premises; take meter readings; resolve final payments; keep evidence of handover. |
Our commercial lease checklist is a helpful companion if you are planning the next stage of your occupation.
So, what happens when a commercial lease fixed term is ending? Everything flows from one question: is the lease protected by the Landlord and Tenant Act 1954, or has it been validly contracted out?
If the lease is protected, the contractual expiry date does not necessarily end the tenancy. Section 24 can continue it, and the landlord and tenant can use the statutory renewal and termination procedures. If the lease is contracted out, the position is very different, because there is normally no automatic statutory continuation or renewal right.
Whichever type of lease you have, do not overlook the practical end of term issues: renewal, rent, notices, repairs, reinstatement, dilapidations, service charges, rent deposits and handover. The safest approach is to review the lease well before the expiry date, ideally before the deadlines begin to restrict your options.
Our commercial lease solicitors can assist landlords and tenants with lease expiry, renewals, Section 25 notices, Section 26 requests, Landlord and Tenant Act 1954 advice, security of tenure, contracted out leases, heads of terms, holding over, lease exit strategies, dilapidations, rent deposits and new commercial leases.
If your commercial lease is approaching its fixed term expiry date, contact Commercial Lease Specialists early so that your renewal rights, notice deadlines and exit obligations can be reviewed before important dates pass.