Commercial Lease Disputes UK: Legal Strategies to Resolve Them

At a glance

• Landlord's notice under the 1954 Act: must be given not more than 12 nor less than 6 months before the termination date, in the prescribed form, and must state whether the landlord opposes a new tenancy (Landlord and Tenant Act 1954, section 25).
• Grounds to oppose renewal: seven statutory grounds under section 30(1) — three "fault" grounds (repair, persistent rent delay, other breaches) and four grounds unrelated to the tenant's conduct (alternative accommodation, uneconomic sub-letting, demolition/reconstruction, landlord's own occupation).
• Forfeiture for rent arrears: a landlord can re-enter peaceably without a court order and without a section 146 notice, because section 146(11) of the Law of Property Act 1925 disapplies the notice requirement for non-payment of rent. Forfeiture for other breaches needs a valid section 146 notice first.
• CRAR minimum threshold: Commercial Rent Arrears Recovery can only be used where the net unpaid rent meets the minimum amount set by regulations, and the enforcement agent must give the tenant notice of enforcement before attending — CRAR does not end the lease.
• Dilapidations protocol response window: a tenant generally has 56 days to respond to a landlord's Quantified Demand for terminal dilapidations.
• Mediation: not binding unless and until a settlement is signed — but an unreasonable refusal to consider it can affect who pays the costs of later litigation.
• Rent review vs. renewal rent: a mid-term rent review is governed entirely by what the lease itself says; the rent on a 1954 Act renewal is set by the court under section 34 by reference to open market value.

What is a commercial lease dispute?

A commercial lease dispute is any disagreement between a landlord and a business tenant arising from the terms of the lease. The lease is a contract, and — like any contract — it can be misread, ignored, or breached by either side.

The flashpoints that come up most often are unpaid rent and service charges, disagreements over who pays for which repairs, disputes about whether a break clause has been validly exercised, rent review deadlock, arguments over consent to assign or sublet, and claims for dilapidations at the end of the term. Each of these engages a different legal route, and several — security of tenure under the Landlord and Tenant Act 1954, forfeiture, CRAR, and the dilapidations protocol — have their own statutory or procedural framework that sits on top of the general law of contract.

Getting the right process for the type of dispute matters. Serving the wrong notice, or missing a statutory deadline, can weaken or destroy an otherwise strong legal position — this is true for landlords and tenants alike.

Security of tenure: the Landlord and Tenant Act 1954

Most business tenancies in England and Wales are protected by Part II of the Landlord and Tenant Act 1954, which gives a tenant occupying premises for business purposes the right to apply for a new tenancy when the current one ends, unless the lease has been validly excluded ("contracted out") from the Act. This is the framework behind most disputes about whether a tenant can stay in the premises.

Continuation of the tenancy. Under section 24 of the Act, a protected business tenancy does not simply end at the contractual expiry date — it continues automatically on the same terms until it is brought to an end in one of the ways the Act allows. This means a tenant who does nothing does not lose the premises the day the fixed term expires.

The landlord's notice. A landlord who wants to end the tenancy must serve a notice under section 25, in the prescribed form, specifying the date the tenancy is to end. That notice must be given not more than 12 nor less than 6 months before the specified termination date, and it must state clearly whether the landlord opposes the grant of a new tenancy. If the landlord is not opposed, the notice must also set out the landlord's proposed terms for the new tenancy — the property, the rent, and the other terms.

The tenant's request. Alternatively, the tenant can take the initiative and serve a request for a new tenancy under section 26, which triggers the same statutory process from the tenant's side.

Grounds of opposition. If a landlord wants to oppose a new tenancy, the ground (or grounds) must be one of the seven set out in section 30(1) of the Act, and it must be stated in the section 25 notice or section 26(6) counter-notice:

1. (a) The tenant is in breach of its repairing obligations and, in view of the state of the holding, ought not to be granted a new tenancy.
2. (b) The tenant has persistently delayed paying rent that has become due.
3. (c) Other substantial breaches of the tenant's obligations, or any other reason connected with the tenant's use or management of the holding.
4. (d) The landlord has offered suitable alternative accommodation on reasonable terms.
5. (e) Where the current tenancy arose from sub-letting part of a larger property, the landlord requires possession to let or dispose of the whole, and the combined rent from separate lettings would be substantially less.
6. (f) The landlord intends to demolish or reconstruct the premises, or carry out substantial construction work, and could not reasonably do so without obtaining possession.
7. (g) The landlord intends to occupy the holding itself, for its own business or as a residence (subject to a five-year qualifying period on the landlord's interest in most cases).

Grounds (a) to (c) turn on the tenant's own conduct. Grounds (d) to (g) do not — they can apply even to a model tenant — and where the landlord succeeds on grounds (e), (f) or (g), the tenant is generally entitled to statutory compensation for having to leave through no fault of its own.

Deadlines. The tenant's or landlord's application to court is time-limited — broadly, it must be made before the termination date specified in the section 25 notice, or the corresponding date under a section 26 request (sections 29 and 29A). This deadline is strict, but landlord and tenant can agree in writing to extend it under section 29B — a common and useful tool where both sides want more time to negotiate rather than litigate.

A narrow exclusion to be aware of. Since 2 December 2024, tenancies granted under the High Street Rental Auction powers in Part 10 of the Levelling-up and Regeneration Act 2023 — which let local authorities auction leases of vacant high street premises — are excluded from sections 24 to 28 of the 1954 Act, so they do not carry the usual statutory security of tenure. This will only be relevant to a small number of tenancies created through that specific local authority process.

Ending the lease early: forfeiture

Forfeiture is the landlord's right to end the lease early because of the tenant's breach, provided the lease contains a forfeiture (re-entry) clause, which the great majority of commercial leases do.

Rent arrears are treated differently from other breaches. Section 146(11) of the Law of Property Act 1925 makes clear that the notice requirements in section 146 — which normally require a landlord to serve a notice specifying the breach, requiring it to be remedied if capable of remedy, and requiring compensation — do not apply to forfeiture for non-payment of rent. In practice, this means a landlord can forfeit for rent arrears by peaceable re-entry: entering the empty premises (typically by changing the locks) without serving any prior notice and without going to court first.

This route is only available for commercial premises. The Protection from Eviction Act 1977 (section 2) prohibits a landlord from enforcing a right of re-entry other than by court proceedings where the premises are let as a dwelling and someone is lawfully residing there — but that protection does not apply to business premises. Even so, peaceable re-entry is not a free-for-all: using or threatening violence to get in, where someone present is known to oppose the entry, is a criminal offence under section 6 of the Criminal Law Act 1977, whatever the landlord's underlying legal right.

For breaches other than non-payment of rent — for example, unauthorised alterations, breach of a user covenant, or disrepair during the term — the landlord must first serve a valid section 146 notice specifying the breach, and (if it is capable of remedy) giving the tenant a reasonable time to remedy it, before forfeiting.

Relief from forfeiture. Whichever route is used, the tenant (or, in some cases, an under-tenant or mortgagee) can apply to the court for relief from forfeiture under section 146(2) or (4) of the 1925 Act. The court has a wide discretion and can grant relief on terms — commonly requiring payment of the arrears and the landlord's reasonable costs. This is why forfeiture, even by peaceable re-entry, is rarely the final word: a tenant who moves quickly can often get the lease reinstated.

Waiver. A landlord who, knowing of a breach, does something that only makes sense if the lease is still continuing — most commonly, demanding or accepting rent that fell due after the breach — risks being treated as having waived the right to forfeit for that breach. This is a well-established trap for landlords who try to keep the option of forfeiture open while still collecting rent, and it is one of the most common practical mistakes in this area.

Commercial Rent Arrears Recovery (CRAR)

CRAR, introduced by sections 71 to 87 of the Tribunals, Courts and Enforcement Act 2007, abolished the old common law right of distress and replaced it with a statutory procedure that lets a landlord instruct a certificated enforcement agent to take control of goods at the demised premises and sell them to recover unpaid rent.

CRAR is narrower than it might first appear:

• Commercial premises only. Under section 75, CRAR is not available at all if any part of the demised premises is let, sub-let, or occupied as a dwelling.
• Rent only. Section 76 defines "rent" for CRAR purposes as the amount payable for possession and use of the premises (plus any interest and VAT charged on it) — it does not include service charge, insurance rent, or other ancillary sums, unless those are expressly reserved as rent under the lease.
• A minimum threshold applies. Section 77 provides that CRAR cannot be used unless the net unpaid rent is at least the minimum amount prescribed by regulations made under the Act, both when notice of enforcement is given and when goods are first taken control of.
• Notice first. The enforcement agent must give the tenant a notice of enforcement, allowing a minimum period before attending to take control of goods, under the procedure in Schedule 12 to the Act and the regulations made under it.

CRAR does not bring the lease to an end, and it does not require a court order to start — which makes it attractive where a landlord wants to recover arrears without losing the tenant or the income stream. Where the tenant has sub-let, section 81 also gives the landlord a right to serve notice on a sub-tenant, diverting rent that the sub-tenant would otherwise pay to the immediate tenant.

Dilapidations at the end of the lease

"Dilapidations" refers to a landlord's claim for damages where the tenant has failed to comply with its repair, reinstatement, or redecoration obligations by the end of the lease. These claims are governed procedurally by the Dilapidations Protocol — the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy — which the court expects both sides to follow before proceedings are issued.

The protocol's typical sequence:

1. Schedule of dilapidations. The landlord (often through a surveyor) sends a schedule setting out the alleged breaches, the remedial works required, and, if relevant, costings — generally within 56 days of the tenancy ending.
2. Quantified Demand. Sent on the same timescale, this sets out and substantiates the monetary sum the landlord is claiming, supported by invoices or a detailed estimate.
3. The tenant's Response. The tenant should respond within a reasonable time — usually within 56 days of the Quantified Demand.
4. Negotiation meeting. The parties (or their surveyors) are encouraged to meet, generally within 28 days of the Response, on a without-prejudice basis to narrow the issues.
5. Quantification of loss. Before issuing proceedings, the landlord's claim should be quantified by reference to either the actual cost of works carried out, or a formal diminution valuation (the reduction in the value of the landlord's interest caused by the breach) — particularly important where the landlord does not intend to carry out all, or any, of the scheduled works.

The protocol is guidance on pre-action conduct rather than a source of substantive legal rights, but the court can and does take non-compliance into account when deciding costs at the end of a case. A landlord who skips the protocol, or a tenant who ignores a Quantified Demand, both risk an adverse costs order even if they ultimately succeed on the substance of the claim.

Rent review disputes

A mid-term rent review is a purely contractual mechanism — there is no general statutory rent review regime for commercial leases in England and Wales. The review basis (open market rent, indexation, a fixed uplift, or some other formula), the review dates, and how a disagreement is resolved are all set by the lease itself. Many leases provide for an unresolved review to be referred to an independent expert or an arbitrator under the Arbitration Act 1996, which governs the conduct of any arbitration the lease provides for.

This is a different question from the rent payable on a 1954 Act renewal. Where a tenant is renewing a protected tenancy and the parties cannot agree the rent, section 34 of the Landlord and Tenant Act 1954 sets the statutory basis the court applies: broadly, the rent the holding might reasonably be expected to achieve on the open market from a willing landlord, disregarding certain factors such as the value added by the tenant's own occupation and any goodwill the tenant has built up in the business at that location.

Landlords and surveyors sometimes use "PACT" — Professional Arbitration on Court Terms, a scheme jointly run by RICS and the Property Litigation Association — as a way of taking a 1954 Act rent or terms dispute out of the court list and into a private arbitration or independent expert determination on agreed terms. It is a voluntary, contractually-agreed route rather than a separate statutory procedure.

Alternative dispute resolution: mediation, arbitration and negotiation

Litigation over a commercial lease dispute is public, slow, and can be expensive for the losing side under the normal costs rules, so most disputes are resolved — and are expected by the courts to at least be attempted to be resolved — without a trial.

• Negotiation. The simplest route, and often the most effective: a calm, factual written record of the issue and what each side wants, following an initial conversation. Many disputes narrow or disappear once both sides have actually read the relevant lease clause carefully.
• Mediation. A trained, neutral mediator helps both sides find a commercial resolution in a confidential, without-prejudice process, typically over a single day. Mediation is not binding — either party can walk away — but a signed settlement agreement reached at the end of it is an ordinary, enforceable contract. The Civil Procedure Rules and the court's general approach to pre-action conduct mean an unreasonable refusal to engage with ADR can affect the costs order made at the end of a case, even for the winning party.
• Arbitration. A private, binding alternative to court, conducted under the Arbitration Act 1996 where the lease (or a later agreement) provides for it. Common for rent review disputes and, via schemes such as PACT, for 1954 Act rent and terms disputes.
• Independent expert determination. Often used for rent review where the lease specifies it — the expert reaches a binding decision based on their own knowledge and judgement, rather than acting as a judge between two competing cases in the way an arbitrator does.

Worked examples

Rent arrears, no wish to end the tenancy. A tenant falls three months behind on rent. The landlord doesn't want to lose a long-standing occupier, so instead of forfeiting, they instruct an enforcement agent to pursue CRAR for the arrears that meet the statutory threshold, while separately agreeing a short repayment plan with the tenant for the balance, recorded by deed. The lease continues throughout.

Breach other than rent. A tenant makes structural alterations without consent, in breach of the alterations covenant. Because this is not a rent arrears case, the landlord cannot simply re-enter — a section 146 notice specifying the breach and (since it is capable of remedy, by removing the unauthorised work or obtaining retrospective consent) requiring it to be remedied must be served first. The tenant remedies the breach within the time given, and forfeiture does not proceed.

End of term. A tenant vacates at lease expiry without doing the redecoration the lease required. The landlord's surveyor sends a schedule of dilapidations and a Quantified Demand under the protocol. The tenant's surveyor responds within 56 days disputing some items and agreeing others; the parties meet within 28 days and settle the claim for a reduced sum, avoiding a court claim entirely.

Renewal opposed on redevelopment grounds. A landlord serves a section 25 notice opposing renewal on ground (f) — an intention to demolish and rebuild — even though the tenant has an unblemished record. Because this is a "no-fault" ground, the tenant may be entitled to statutory compensation for having to leave, calculated by reference to the rateable value of the holding, in addition to being able to test whether the landlord's stated intention is genuine.

Risks and common mistakes

• Missing a 1954 Act deadline. The time limit to apply to court after a section 25 notice or section 26 request is strict; missing it, without a section 29B extension agreement in place, can end a tenant's right to renew.
• Waiving the right to forfeit. A landlord who demands or accepts rent after becoming aware of a breach can lose the right to forfeit for that breach — a frequent, avoidable error.
• Treating CRAR arithmetic loosely. Because CRAR only bites on "rent" as statutorily defined, landlords sometimes wrongly assume service charge or insurance arrears are recoverable through CRAR when they are not, unless specifically reserved as rent in the lease.
• Ignoring the Dilapidations Protocol. Issuing a dilapidations claim without following the schedule / Quantified Demand / Response sequence risks a costs penalty even where the claim itself is sound.
• Confusing rent review with renewal rent. These follow entirely different legal bases (the lease's own review clause versus section 34 of the 1954 Act) and mixing up the two leads to the wrong valuation approach and wasted surveyor fees.
• Assuming mediation is compulsory. It is not — no party can be forced into it — but an unreasoned refusal to consider ADR carries real costs risk later.

Practical steps for resolving a lease dispute

1. Read the lease properly before doing anything else. Check the specific clauses on rent, repair, insurance, forfeiture, break rights, and notices before sending a single email. If the lease is silent or ambiguous, that changes the strategy.
2. Identify which legal route actually applies. A rent arrears dispute, a renewal dispute, and a dilapidations dispute are governed by different rules with different deadlines — confirm which one you're in before choosing a course of action.
3. Open a conversation early, in writing. A calm, factual written note of the issue and what you want to happen is often enough to move things forward, and it creates a record if the dispute escalates.
4. Follow the correct formal procedure. Use CRAR or forfeiture (as appropriate) for arrears, the Dilapidations Protocol for end-of-term repair claims, and the section 25/26 timetable for renewal disputes. Using the wrong procedure wastes time and costs, and can weaken your position.
5. Consider mediation before instructing litigators. It is confidential, can resolve a dispute in a single day, and the settlement — once signed — is a binding contract.
6. Treat litigation as the last resort. Court proceedings are public, slow, and expensive, and the costs rules can be unforgiving for the losing side. Where litigation is unavoidable, go in with clear evidence and a realistic view of cost and time.
7. Take advice early where a statutory deadline or notice is involved. The consequences of a missed 1954 Act deadline or a defective section 146 or CRAR notice are usually much more expensive than the advice that would have avoided the mistake.

This is legal information, not legal advice. It explains the general law of England and Wales and does not take account of your specific circumstances or the exact wording of your lease. Reading it does not create a solicitor–client relationship. LegalDocuments.co.uk is not a law firm and is not regulated by the Solicitors Regulation Authority. For advice on your situation, speak to our telephone legal advice service or consult a regulated solicitor.

Last reviewed: August 2026 · Next review due: August 2027 or on legislative change.