Commercial Property Law UK: Leases, Tax & Disputes

At a glance

• Security of tenure default: if a tenancy falls within Part II of the Landlord and Tenant Act 1954, it continues automatically past the contractual term until ended under the Act — it does not simply expire.
• Landlord ending the tenancy: a section 25 notice, 6–12 months before the termination date, prescribed form, must state whether the landlord opposes renewal and, if so, the ground(s) relied on.
• Tenant triggering renewal: a section 26 request, available where the tenancy exceeds one year, same 6–12 month window — only one notice (landlord's or tenant's) can be served per tenancy.
• Grounds of opposition: seven grounds under section 30(1), from tenant default through to the landlord's own redevelopment or occupation plans.
• Contracting out: possible under section 38A via a prescribed warning notice and tenant declaration completed before the lease is granted.
• 1954 Act reform: the Law Commission's second consultation (published 16 June 2026) is open until 16 September 2026 — proposals only, nothing is in force yet.
• MEES / EPC: minimum EPC E to let non-domestic property applies to all lettings since 1 April 2023; from 2031, buildings over 1,000 sqm will need EPC B where cost-effective, subject to secondary legislation not yet passed.
• SDLT (non-residential): 0% up to £150,000, 2% on the next £100,000, 5% above £250,000 — check GOV.UK for current rates and the separate rent-based calculation on new leases.
• Registration: leases granted for more than 7 years, and freehold transfers, are compulsorily registrable dispositions at HM Land Registry.

What commercial property law covers

Commercial property law is the body of rules governing land and buildings used for business purposes in England and Wales — offices, retail units, industrial premises, hotels, leisure sites and mixed-use developments. Unlike residential property, which has a heavy layer of consumer protection built in, commercial dealings assume the parties are commercially sophisticated and will negotiate their own terms. The result is that the written lease or sale contract carries enormous weight, because there is comparatively little default statutory protection standing behind it.

The field pulls together several strands: the common law of contract and land law, the Landlord and Tenant Act 1954 for business tenancy security of tenure, planning and environmental statutes including the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, Stamp Duty Land Tax, and VAT treatment of land. Any commercial property matter usually needs someone thinking about legal title, contractual drafting, tax and regulatory compliance at the same time — and the consequences of getting a single clause or notice wrong can be significant given the sums and time commitments typically involved.

Business tenancies: security of tenure under the 1954 Act

Part II of the 1954 Act applies where a tenancy includes premises occupied by the tenant for the purposes of a business carried on by them. Where it applies, sections 24 to 28 mean the tenancy continues automatically at the end of the contractual term — it does not simply come to an end — until it is terminated in one of the ways the Act specifies. This is what people mean by "security of tenure": the tenant has a statutory right to a new tenancy, subject to limited grounds on which the landlord can object.

How the tenancy can be brought to an end or renewed

| Route | Who serves it | Timing | Must contain | |---|---|---|---| | Section 25 notice | Landlord | Not more than 12, not less than 6 months before the specified termination date | Prescribed form; a statement of whether the landlord opposes renewal and, if opposed, the section 30(1) ground(s); if not opposed, proposed terms for the new tenancy | | Section 26 request | Tenant (only where the current term exceeds one year) | Same 6–12 month window before the proposed new tenancy start date | Prescribed form; the tenant's proposed terms for the new tenancy |

Only one notice can be served per tenancy. If the tenant serves a section 26 request first, it takes precedence over any later section 25 notice from the landlord. Where a tenant serves a section 26 request, the landlord has 2 months to respond stating it will oppose an application to the court, citing the ground(s) relied on.

Grounds a landlord can rely on to oppose renewal

Section 30(1) sets out seven grounds, and the landlord must specify which apply in the notice itself — it cannot simply object without stating why:

1. (a) the tenant's failure to comply with repair obligations
2. (b) persistent delay in paying rent
3. (c) other substantial breaches, or a reason connected with the tenant's use or management of the holding
4. (d) suitable alternative accommodation has been offered on reasonable terms
5. (e) letting the whole of a superior property (where the current tenancy is a sub-letting of part) would produce substantially more rent
6. (f) the landlord intends to demolish, reconstruct, or carry out substantial construction work and could not reasonably do so with the tenant in occupation
7. (g) the landlord intends to occupy the holding for its own business or as a residence

Grounds (e) to (g) are generally unavailable if the landlord's interest was only acquired within the 5 years before the tenancy ends, unless the property has been continuously let since before that period — a safeguard against landlords buying in specifically to defeat a renewal.

Contracting out under section 38A

Landlords and tenants can agree in advance that sections 24 to 28 will not apply to a tenancy — commonly called "contracting out." The process, set out in section 38A and the accompanying 2003 Order, requires: the landlord to serve a prescribed warning notice on the tenant before the lease is granted; the tenant (or someone authorised to act for them) to make a declaration acknowledging the consequences — a simple declaration suffices if made at least 14 days before completion, otherwise a statutory declaration is required; and the lease to record that the procedure has been followed. Miss a step and the exclusion can be void, leaving the tenant with security of tenure regardless of what the lease says. Because of this, whether a lease is inside or outside the Act — and whether contracting out was done correctly — is one of the first things worth checking, whether you are renewing a lease or taking on a new one. See our guide on commercial lease renewal.

Is the 1954 Act about to change?

Not yet — and as at August 2026, nothing in this section has changed the law. The Law Commission is reviewing Part II of the 1954 Act at the request of government. A first consultation ran from November 2024 to February 2025, after which the Commission provisionally concluded that the existing contracting-out model of security of tenure should stay (no move to mandatory security of tenure or abolition), but that the current 6-month threshold for excluding short fixed-term tenancies from the Act's scope should rise, likely to somewhere between one and two years.

Building on that, a second consultation paper was published on 16 June 2026, running to 13 chapters and 67 questions, covering matters including simplifying the contracting-out process, how rent is set on renewal (including turnover rents and the interim rent process), and whether the Minimum Energy Efficiency Standards regime should feed into the landlord's grounds of opposition. The consultation closes on 16 September 2026, after which the Commission will analyse responses and publish a final report with recommendations. Any actual change to the Act would still require a government response and new legislation — this is a consultation stage, not a change in the law, and anyone advising on a lease today should apply the Act as it currently stands.

Buying, selling and leasing: tax and registration

Stamp Duty Land Tax. For non-residential and mixed-use property, SDLT is charged on increasing portions of the price: 0% up to £150,000, 2% on the portion from £150,001 to £250,000, and 5% on the remainder. On a new lease, SDLT is calculated separately on the lease premium (using those same rates) and on the net present value of the rent payable over the life of the lease — 0% up to £150,000 of net present value, 1% on the portion up to £5,000,000, and 2% above that. Buying an existing (assigned) lease is simpler: SDLT is charged only on the price paid for the lease. Rates and thresholds can change between Budgets, so always check GOV.UK before relying on a figure for a live transaction.

VAT and the option to tax. Commercial property transactions are exempt from VAT by default, but a seller or landlord can "opt to tax" a property under the rules in VAT Notice 742A, which makes rent or the sale price standard-rated. This affects cash flow, the recoverability of VAT on associated costs, and how SDLT is calculated where VAT forms part of the consideration. Confirm the VAT position early — it is not always obvious from the lease or sale contract alone.

Registration at HM Land Registry. Freehold purchases and new leases granted for a term of more than 7 years are compulsorily registrable dispositions. HM Land Registry's Practice Guide 25 sets out the detail; broadly, an application to register a qualifying lease needs to be made within 2 months of the grant. Missing the deadline can affect the legal status of the tenant's interest, so this is not a step to leave until convenient.

Due diligence. For a purchase, expect title investigation, searches (local authority, environmental, water and drainage, and others depending on location and use), a survey, and planning checks. For a lease, review any head lease, check required consents, and look at the service charge history. Environmental due diligence matters particularly for industrial or former industrial sites, where contamination liability can transfer with the land.

Energy efficiency compliance: MEES and EPC ratings

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 set the Minimum Energy Efficiency Standard (MEES) for privately rented property, including non-domestic (commercial) premises. Since 1 April 2018, a landlord has generally not been able to grant a new tenancy, or extend or renew an existing one, if the property's EPC rating is below E, unless a valid exemption has been registered. Since 1 April 2023, that requirement applies to all privately rented non-domestic property, even where there has been no change of tenancy — so an existing tenancy does not put a landlord outside the rules.

Exemptions exist and must be registered on the PRS Exemptions Register before they can be relied on — for example where the cost of the required improvements fails a "7-year payback test," where all reasonably available improvements have already been made, or where a required improvement needs third-party consent (a superior landlord, a tenant, or a planning authority) that cannot reasonably be obtained. Full detail is in the GOV.UK landlord guidance.

What is proposed but not yet law. The government's June 2026 interim response confirms an intention that, from 2031, privately rented buildings over 1,000 square metres will need to reach EPC B where cost-effective. Buildings below that size threshold are intended to remain subject to the current EPC E minimum, with no fixed deadline set for going further. A previously floated interim EPC C milestone for 2027 has been dropped entirely. None of this takes effect until secondary legislation has passed through Parliament, and the government has said further detail will follow in a full response to the earlier consultations — so treat the 2031/EPC B figure as a clear direction of travel, not a current legal requirement.

A separate point worth flagging: the Leasehold and Freehold Reform Act 2024 is aimed squarely at residential leasehold — ground rents, enfranchisement, and related reforms. It does not alter security of tenure, contracting out, or MEES obligations for genuine commercial lettings, and applying its residential provisions to a business tenancy would be a mistake.

Repairs, dilapidations and assigning a lease

Repair responsibility depends entirely on the lease drafting. Many commercial leases are full repairing and insuring (FRI), meaning the tenant carries responsibility for repair and reimburses the landlord's insurance premium; in multi-let buildings, internal repairs often sit with the tenant while the landlord repairs the structure and common parts, recovering the cost through a service charge. A schedule of condition attached at the outset can limit a tenant's exposure where premises are not in perfect condition when the lease starts.

At lease end, a landlord will typically serve a schedule of dilapidations — a list of the repair, decoration and reinstatement breaches, with either the works required or a cash equivalent claim. Section 18 of the Landlord and Tenant Act 1927 caps what the landlord can actually recover: damages cannot exceed the amount by which the landlord's reversion has been diminished in value by the breach, and no damages at all are recoverable if the premises would have been demolished or structurally altered shortly after the lease ended anyway — because in that case the repairs would have been worthless. See our detailed guide on the schedule of dilapidations for commercial leases and, where a landlord is instead looking to end a lease early over a breach, lease forfeiture.

Where a tenant wants to assign a lease, most commercial leases require the landlord's consent, on terms that consent cannot be unreasonably withheld. Section 1 of the Landlord and Tenant Act 1988 backs this up with a statutory duty: the landlord must give consent within a reasonable time unless it is reasonable to refuse, and must give written reasons for refusing or for any condition attached. If it is later disputed whether the landlord acted within a reasonable time, the burden is on the landlord to prove it did — not on the tenant to prove it didn't.

Worked example: getting the section 25 timing right

A fictional landlord, Meridian Estates, wants to end a tenant's business tenancy so it can redevelop the site. The current lease term runs out on 30 June 2027. Meridian wants vacant possession as close to that date as possible.

Working back from 30 June 2027, Meridian's section 25 notice must specify that date (or a date not earlier than when the lease would otherwise have ended) and must be served no more than 12 months and no less than 6 months beforehand — so any time between 1 July 2026 and 31 December 2026. Because Meridian intends to redevelop, the notice must state that it opposes the grant of a new tenancy and specify ground (f) of section 30(1) (intention to demolish or reconstruct). If Meridian instead served the notice in February 2027 — inside the 6-month minimum window — the notice would not have effect, and Meridian would need to start again, potentially losing months of the redevelopment timeline. This is exactly the kind of procedural detail worth checking against the statute, not assumed from a template.

Practical next steps

1. Define what you actually need. Before looking at premises or drafting terms, set out the commercial purpose: the use, the footprint, the length of commitment you can stomach, and the flexibility needed for growth or exit.
2. Agree heads of terms carefully. Usually marked "subject to contract," but they set the commercial anchor — rent, term, break rights, rent review, repair obligations, permitted use, and any incentives.
3. Check the 1954 Act position early. Establish whether the tenancy is, or will be, inside or outside security of tenure, and if contracting out is intended, follow the section 38A procedure precisely before the lease is signed.
4. Carry out proper due diligence. Title investigation, searches, survey, planning checks, EPC rating and MEES exemption status, and — for a lease — service charge history and any head lease terms.
5. Confirm the tax position. Work out the likely SDLT liability (lease premium and rent NPV where relevant) and check whether the seller or landlord has opted to tax for VAT purposes.
6. Complete and register. Freehold purchases and leases over 7 years must be registered at HM Land Registry, generally within 2 months of completion. File the SDLT return within the statutory window and deal with post-completion obligations — notifying insurers, complying with ongoing covenants — immediately.

This guide provides general information about commercial property law in England and Wales. It is not legal advice and is not a substitute for advice tailored to your specific circumstances. The law described was accurate as at August 2026 and is subject to change — always check GOV.UK and legislation.gov.uk for the most current position, particularly on SDLT rates and the status of the Law Commission's review and the proposed MEES changes.

Last reviewed: August 2026 by a non-practising solicitor · Next review due: August 2027 or on legislative change.