The Landlord and Tenant Act 1954 set up a regime for commercial properties to grant tenants an automatic right of renewal of an expired contractual tenancy unless a statutory grant for possession is made out (and sometimes compensation is paid).

Leases are therefore often referred to as being either “inside” or “outside” the 1954 Act.

A lease which is outside the Act can either be so because it falls into one of several categories (for example, certain fixed short term leases on a one-off basis) or (more often) because the lease states that it is “outside” and the tenant is served with formal notice prior to the lease to confirm that the lease is excluded.

Leases which are “inside” contain a statutory right of renewal which can be triggered by either the landlord or the tenant.

The notices are best prepared by a property professional as there are requirements of format, mode of service and timing which would make it dangerous to handle without professional assistance.

Once inside the Act a landlord can only oppose a renewal on certain statutory grounds which are, very broadly, that either the tenant has been or is in default or that the landlord has a scheme to redevelop the site or requires the premises for its business.

The latter two grounds require compensation to be paid to the tenant.

Once established, the terms of the new lease are negotiated and will broadly be on the same terms as the old but with a market rent review.

If the terms are not agreed, an application to the court is made and after receiving expert survey evidence the terms and rent will be fixed by the Judge.

The court will also determine disputes as to whether a particular ground for possession has adequately been made out.

So if you are a landlord or tenant and you receive a notice you need to act promptly and take advice.

If no notice has been served and you are approaching the last year of the term then advice as to the potential renewal should also be taken.