Section 34 of the Landlord and Tenant Act 1954 sets the rent on every statutory lease renewal in England and Wales. Your landlord's surveyor understands it in detail. Your landlord's solicitor has watched it argued dozens of times. The framework contains multiple provisions that work in your favour — disregards that strip your own improvements from the rent, a default burden of proof on lease terms, a right to statutory compensation if the landlord opposes renewal on no-fault grounds — and none of them will be volunteered to you across the negotiating table.

This article explains what the framework actually says. It does not replace advice on your specific lease. But it gives you the map.

Lease Renewal Under the 1954 Act Is Not a Rent Review

Your lease is approaching expiry. You have either received a Section 25 notice from your landlord proposing new terms, received a hostile Section 25 indicating the landlord intends to oppose renewal entirely, or decided to serve a Section 26 request yourself to take control of the timetable. Any of these three positions means you have entered the statutory renewal regime — and it is a fundamentally different world from the rent review you went through five years into the term.

Rent review is a creature of the lease. It operates within the valuation assumptions your original solicitor agreed when you signed. Renewal is governed entirely by statute. The 1954 Act sets the valuation principles, the procedural timetable, the grounds on which the landlord can resist, and the default position on every term of the new lease where the parties cannot agree. Your existing lease is the starting point; it is not the answer.

Three things most tenants get wrong at the renewal stage. First, they treat rent as the only variable. In fact, term length, break rights, repair obligations, alienation provisions, service charge wording, user clauses and the rent review pattern of the new lease are all on the table simultaneously — and each one interacts with the rent. Second, they underestimate the complexity of the valuation. The Section 34 hypothetical letting is a legal construct with specific statutory disregards, and building it correctly requires both legal and surveying expertise working together. Third, they assume the landlord's team will flag the parts of the framework that favour the tenant. They will not. That is not how negotiations work.

Is Your Lease Protected? Check This Before Anything Else

Before the valuation, the procedural framework, the case law — before any of it — you need to confirm whether your lease enjoys 1954 Act protection at all.

The default position is protection. A business tenancy occupied by the tenant for the purposes of its business is automatically protected by Part II of the 1954 Act. Protection means the lease does not expire at the contractual term date. It continues on the same terms under Section 24 until ended by a valid statutory notice, and you have the right to a new tenancy unless the landlord can make out one of the seven grounds of opposition in Section 30.

The exception is contracting out. Under Section 38A, inserted by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 with effect from 1 June 2004, parties can exclude security of tenure before the lease is granted. The procedure requires the landlord to serve a prescribed warning notice on the tenant; the tenant then signs a simple declaration (if served at least 14 days before completion) or a statutory declaration sworn before an independent solicitor (if less than 14 days). Both documents must exist, with correct dates, before the lease completes.

If the procedure was not followed correctly, the lease is protected — even if it says "contracted out" on its face. Look for the recital in the lease that refers to the warning notice, the declaration, the dates, and the specific reference to the 2003 Order. If any of that looks irregular — wrong dates, a missing declaration, a reference to the wrong statutory instrument — take specialist advice before assuming you have no protection. The protection may still exist.

A contracted-out lease changes the leverage map entirely. You have no statutory right to renewal and no right to compensation under Section 37. The valuation principles in Section 34 still inform the commercial negotiation, but you are bargaining from a position of dependence rather than statutory entitlement. A separate strategy applies; a contracted-out lease negotiation is covered in the dedicated piece in this series.

The Procedural Framework You Need Before Negotiations Start

Most commentary on Section 34 plunges directly into valuation. That is a mistake. Tenants who do not understand the procedural timetable lose tactical ground before the rent argument begins.

Section 24 is the continuation provision. Your lease does not expire at the contractual term date. It continues on the existing terms until ended by a valid statutory notice or court order. You keep paying the passing rent until interim rent is determined.

Section 25 is the landlord's notice terminating the tenancy. It must be served between 6 and 12 months before the termination date it specifies, and it comes in two forms: friendly (the landlord is willing to grant a new tenancy, with proposed terms set out) or hostile (the landlord intends to oppose renewal on one or more Section 30 grounds, specified in the notice). Once you receive a Section 25 notice, you cannot serve a Section 26 request.

Section 26 is your request for a new tenancy. You can serve it between 6 and 12 months before your proposed commencement date for the new tenancy. Serving it gives you control of the timetable. The landlord then has two months to serve a counter-notice opposing renewal on Section 30 grounds; if no counter-notice is served in time, the landlord loses the right to oppose. Serving a Section 26 request is a tactical decision, not an administrative one — take advice before sending it.

Section 27 is your exit route. Section 27(1) allows you to end the continuation tenancy by notice before the contractual expiry; Section 27(2) allows you to end it after expiry by giving three months' written notice. This is how you leave cleanly without court proceedings if renewal is not viable.

Section 29A is the application-to-court deadline. Either party may apply for an order for a new tenancy no later than the date specified in the Section 25 notice, or the day before the proposed commencement date in the Section 26 request. The parties may agree in writing under Section 29B to extend this deadline — and may keep extending, provided each agreement is concluded before the prior deadline expires. A missed deadline is almost always fatal. The tenancy ends; the statutory right to renewal and compensation is lost.

PACT — Professional Arbitration on Court Terms — is a joint RICS and Law Society scheme that gives parties an alternative to court. With the court's consent, outstanding renewal issues (typically rent, interim rent, or disputed lease terms) are referred to an arbitrator or independent expert from a trained panel, who applies Section 34 and Section 35 exactly as the court would. PACT is best suited to disputes about rent or terms where both parties want a resolution and the question of whether the tenancy renews at all is not in dispute. It is under-used, particularly in office renewals. Note the practical limitation: PACT can be as costly and slow as court determination where the adjudicator is not proactive. Assess it case by case.

One live point to flag: the Law Commission published its first consultation paper on reforming Part II of the 1954 Act in November 2024. The consultation closed in February 2025 and an Interim Statement has since been issued. The Commission's provisional conclusion is that the existing contracting-out model will be retained. A second consultation paper, covering the technical detail of the renewal process, the Section 30 grounds, interim rent and compensation, is awaited. No reform legislation has been enacted. The current framework applies in full.

Section 34 of the Landlord and Tenant Act 1954: How the Renewal Rent Is Set

Section 34(1) provides that the rent under the new tenancy shall be that at which, having regard to the terms of the new tenancy other than those relating to rent, the holding might reasonably be expected to be let in the open market by a willing lessor, with four matters disregarded.

Those four disregards are the heart of the section. Two of them — (a) and (c) — are the provisions most landlord surveyors will not volunteer to you.

The sitting-tenant overbid — Section 34(1)(a)

The valuation must disregard any effect on rent of the fact that you and your predecessors in title have been in occupation of the holding. In plain English: the hypothetical letting is not to you. It is to a notional willing tenant in the open market who has no existing relationship with the premises, no fit-out to protect, no operational disruption to fear. A stranger to the building.

You, by contrast, face relocation costs, fit-out costs, staff disruption and client relationship risk if you move. You would rationally pay more to stay than the market would pay to come in. That premium — sometimes called the sitting-tenant overbid — is exactly what Section 34(1)(a) strips from the rent. Your landlord's surveyor knows this. They will not typically open the conversation by pointing it out.

Goodwill — Section 34(1)(b)

Any goodwill attached to the holding by reason of your business is disregarded. If your firm's presence has made the address desirable — a professional services brand that attracts footfall to the building, a retail profile that lifts the whole scheme — that value you created is excluded from the rent calculation. Goodwill is commercially more significant in retail than in most office renewals, but it matters for any branded headquarters and any customer-facing office with real location premium.

Tenant's improvements — Section 34(1)(c)

This is the single most under-claimed disregard in office renewals, and the one that can move a renewal rent most materially.

Section 34(1)(c) requires the court to disregard any qualifying improvement carried out by you. Section 34(2) defines the conditions: the improvement must have been carried out otherwise than in pursuance of an obligation to the immediate landlord, and either (i) it was carried out during the current tenancy, or (ii) it was completed within 21 years before the application to the court, the holding has been within Part II tenancies throughout, and you did not quit at the end of each tenancy.

What this means in practice: if you fitted out your office beyond the developer's shell-and-core specification — partitioned the space, installed raised-access flooring, put in additional cooling, upgraded power, added dedicated data risers — and you paid for it yourself without those works being required by your lease or your agreement for lease, they are stripped from the rent. The hypothetical letting is of the premises as they would be if your improvements had never been made. You are valued back against the blank box you walked into.

Properly argued, this disregard alone moves rent materially in a fitted-out professional services headquarters. In a building let at £55 psf in fitted condition against a shell-and-core hypothetical of £48 psf, the difference across 10,000 sq ft is £70,000 a year. Over a 10-year term, that is £700,000.

The problem is documentation. Tenants who lose this disregard do not lose it because the law fails them. They lose it because they cannot evidence it. No invoices, no licence for alterations, no record of the works being tenant-funded rather than landlord-funded, no completion date — no disregard. The time to build that evidence file is at original fit-out, not 12 years later when the renewal notice arrives.

The fourth disregard — Section 34(1)(d), licensing — does not apply to office premises and is omitted here.

Section 34(3) gives the court power to include a rent variation provision in the new tenancy. This is the statutory basis for inserting a rent review clause in the renewal lease and is a strategic lever discussed under Section 35 below.

The central point: Section 34 builds a hypothetical letting that is deliberately different from your actual letting. The whole valuation argument lives inside that hypothetical. Whoever defines the hypothetical first — the specification, the improvements disregard, the comparable set — frames the rent that follows.

The Cases That Interpret Section 34: What the Courts Have Actually Said

Case law is where the Section 34 framework becomes a live weapon, or a live problem, depending on whose side it is being used. These are the authorities your advisers need to know.

O'May v City of London Real Property Co Ltd [1983] 2 AC 726 (HL)

The foundational authority, and the most powerful single principle in 1954 Act practice for tenants who like their existing lease terms. The House of Lords held that when the court determines the terms of a new tenancy under Section 35, it must have regard to the terms of the current tenancy, and the party seeking to change those terms bears the burden of justifying the change. The proposed change must be fair and reasonable as between the parties; the court will consider the relatively weak bargaining position of the sitting tenant and the protective purpose of the Act. On the facts, the landlord's proposal to shift long-term repairing and maintenance risk to the tenants was rejected as unjustified, even with a rent reduction offered in compensation.

In 2026, landlords routinely propose modernised service-charge wording at renewal, new ESG covenants, landlord redevelopment break rights and expanded step-in provisions. O'May places the burden of justification on the landlord, clause by clause, for every proposed departure from your current terms. You do not have to justify keeping what you already have.

Edwards & Walkden (Norfolk) Ltd v The Mayor and Commonalty and Citizens of the City of London [2012] EWHC 2527 (Ch)

Sales J in the Chancery Division, considering the renewal of Smithfield Market leases, held that the O'May burden can be discharged by a landlord where modernisation of terms is genuinely justified. The dispute was whether new leases should carry a fixed all-inclusive rent (the tenants' preference) or a separate rent plus variable service charge (the City's preference). Sales J found for the City: the parties agreed in principle that the landlord should recover actual costs; a fixed all-inclusive rent created systematic over- or under-recovery risk; and a variable service charge for multi-occupied commercial premises is market norm, "generally regarded as fair by both landlords and tenants."

The case is correctly understood as a calibration of O'May, not a retreat from it. Modernisation is a justification for change, not an entitlement to it. The landlord must still satisfy the court that the proposed change is fair and reasonable; Edwards & Walkden shows what that looks like when they succeed. For tenants, the lesson is to test every proposed modernisation against the O'May burden rather than accept it as inevitable market evolution.

W (No 3) GP (Nominee A) Ltd & W (No 3) GP (Nominee B) Ltd v JD Sports Fashion Plc (Nottingham County Court, HHJ Fine, 22 October 2021, unreported)

A County Court decision — persuasive only, not binding — on whether a turnover rent can be imposed at renewal. The landlord of a major Derby retail unit sought a turnover-based structure; JD Sports sought a fixed market rent. HHJ Fine held that the court has jurisdiction to award a turnover rent in principle, but declined to do so: a turnover rent is by definition referable to this tenant's trading at this location, which is precisely what Sections 34(1)(a) and 34(1)(b) require the court to disregard. A turnover structure can be appropriate only where turnover rents are the norm for the relevant market and hypothetical turnover can be reliably established. A fixed rent of £104,300 per annum was ordered; interim rent was set at £160,300, with the higher figure reflecting a material shift in market conditions between the appropriate date and trial.

Landlords proposing turnover-linked or hybrid structures in office renewals, particularly in mixed-use or high-footfall schemes, will face this reasoning. JD Sports provides the principled statutory pushback.

HPUT Trustee No 1 Ltd & HPUT Trustee No 2 Ltd v Boots UK Ltd (Central London County Court, HHJ Dight CBE, 24 May 2021, unreported)

County Court only — persuasive — on term length and break clauses under Sections 33 and 35. HHJ Dight granted a five-year term against the landlord's preference for ten, on the basis that ten years was no longer market norm and the tenant needed flexibility in a structurally uncertain post-pandemic retail environment. A tenant's break at year three was ordered, applying the O'May essential fairness framework.

The office market in 2026 shares the same structural uncertainty: hybrid working has reduced the confidence with which any occupier can predict its space requirement five to seven years ahead. A tenant's case for a shorter term and an early break right is stronger now than at any point in the last two decades, and HPUT v Boots is the practical County Court authority for it.

WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbH (Winchester County Court, HHJ Richard Parkes QC, 25 March 2021, unreported)

County Court only. WH Smith's renewal of its Westfield Shepherd's Bush unit produced two important holdings. First, on the pandemic rent suspension clause: the court adopted a broad trigger (compulsory closure of non-essential retail generally) rather than the landlord's narrower trigger (closure of WH Smith specifically), and rejected the landlord's claim to a 10% rent uplift on the ground that pandemic clauses had become market norm and were priced into the open market. Second, on service charge modernisation: the landlord's proposed wording to capture sustainability and EPC costs at re-letting was rejected because the O'May burden had not been discharged — the drafting was opaque and would invite future litigation.

A companion decision, Poundland Ltd v Toplain Ltd (Brentford County Court, HHJ Johns QC, April 2021, unreported), reached the opposite conclusion on pandemic clauses where they had not been agreed in principle: the O'May burden was not discharged and the clause could not be imposed on an unwilling landlord. Both are County Court decisions only, and they pull in different directions. The live lesson in 2026 is that risk-allocation clauses — pandemic, mandatory closure, ESG compliance cost — are now negotiated items in every substantial renewal, not boilerplate the landlord controls. Whether they can be imposed at all depends on whether the O'May burden is met on the specific facts.

These cases are not academic exercises. Versions of every argument in them are running right now, in courts and PACT referrals across England and Wales. The tenants who prevail are those whose advisers know the authorities as well as the landlord's team.

Beyond Rent: Section 35 and the Leverage Map

Rent is one number. The other terms of the new lease are the framework within which you pay that number for the next 5, 10 or 15 years. Each clause has a financial consequence. Most tenants only discover this after they have signed.

Term length (Section 33). The court may impose a term up to a maximum of 15 years (amended from 14 years by the 2003 Order). Within that ceiling it determines what is reasonable in all the circumstances. In the current market, County Court decisions are trending toward 5-year terms with early break rights rather than the 10-year terms that dominated pre-2020. A longer term without a break is worth less to you and more to the landlord for investment financing purposes — that asymmetry should be reflected in the rent.

Break clauses. The conditions attached to a break right can render it valueless. Conditions to resist: "all covenants compliance" (any technical breach defeats the break, however minor); "material compliance" (slightly better, still a trap in dispute); vacant possession requirements that go beyond what delivering the demise actually requires. A well-drafted break is a real option. A poorly drafted one is an illusion.

Rent review in the new lease (Section 34(3)). The court can include a rent variation provision in the renewal lease. This is where you argue for index-linked reviews with caps, for longer review periods, or for no review at all on a short term. The review mechanism in the next lease is a Section 34/35 issue at renewal — not a point left to negotiate in the new lease itself. See the rent review pillar for detail on what market-norm review provisions now look like.

Repair. O'May applies. The landlord cannot tighten a full repairing and insuring obligation at renewal without discharging the burden of justification. If your current lease already carries FRI terms, that is the baseline.

Alienation. Modernisation arguments are common here. Resist proposals to broaden the circumstances in which an authorised guarantee agreement (AGA) is required on assignment — a blanket AGA requirement regardless of assignee covenant strength is a significant liability.

Service charge. Landlords routinely propose updated wording at renewal. The O'May burden applies clause by clause. Some modernisation is fair, as Edwards & Walkden demonstrates; other proposed changes, particularly those capturing new categories of sustainability cost without clear drafting, will not survive scrutiny. See the service charge pillar.

ESG and green lease provisions. Energy performance obligations, mandatory EPC compliance covenants, green data-sharing requirements and fit-out sustainability standards are now proposed as standard in many renewal negotiations. Each one imposes a compliance cost on you that a new tenant negotiating from scratch would factor into its rent offer. If you accept these obligations, the Section 34 rent should reflect the burden. If the landlord wants the benefit of green lease wording, the cost sits in the rent.

The underlying principle throughout: every concession you make on terms has a rent implication. Agree a 10-year term with no break, and the rent should be lower than for a 5-year term with a year-3 break — you are removing optionality that the market prices. Accept user-clause restrictions that narrow the hypothetical tenant pool, and the Section 34 rent should fall to reflect the narrowed market. These are not abstract points. They are arguments your surveyor should be running.

How a Renewal Rent Is Actually Built in Practice

The Section 34 valuation is a six-step process. This is what the landlord's surveyor will do professionally, with full access to comparable evidence that is not publicly available to you.

1. Define the holding. Section 23 of the Act defines the holding as the premises actually occupied by you for the purposes of your business at the application date — not necessarily the full demise in the original lease if you have sub-let part.
2. Apply the hypothetical assumptions. A willing lessor letting to a willing lessee in the open market, on the terms of the new tenancy (other than rent) as determined under Section 35, with the four Section 34(1) disregards applied.
3. Strip out your improvements. Every qualifying improvement within the 21-year window comes out of the specification. The hypothetical letting is of the premises as they would have been without your fit-out. This step requires cost evidence (invoices, construction contracts), licences for alterations, and completion dates. Without that documentation, the disregard is theoretically available and practically unenforceable.
4. Find comparable evidence. Recent open-market lettings of similar premises, adjusted for floor level, size, specification, term length, rent-free periods and transaction date. Rental evidence from poorly-documented or atypical transactions will be challenged; the comparable set is where the real valuation argument usually lives.
5. Adjust for the terms of the actual new lease. A 10-year lease without a break commands a different rent from a 5-year lease with a year-3 break. A lease imposing ESG compliance obligations commands a different rent from one that does not. These adjustments connect the Section 35 negotiation to the Section 34 number.
6. Express as a headline rent. Calculate the net effective rent after incentives (rent-free periods, capital contributions), then gross it up to the headline passing rent that appears in the lease.

You cannot do this without professional advice, complete comparable evidence and a surveyor who knows the market. An unrepresented tenant cannot replicate step four.

If Your Landlord Is Opposing Renewal: Section 30 and What You Can Do

Most renewals are unopposed. Some are not. Section 30(1) sets out the seven grounds on which a landlord may oppose a new tenancy:

• (a) Failure to comply with repairing and maintenance obligations under the current tenancy.
• (b) Persistent delay in paying rent.
• (c) Other substantial breaches of tenant obligations, or other reason connected with the tenant's use or management.
• (d) Landlord's offer of suitable alternative accommodation on reasonable terms.
• (e) Sub-tenancy of part: the superior landlord would obtain substantially more rent by letting the whole and requires possession for that purpose.
• (f) Landlord's intention to demolish or reconstruct the premises, or carry out substantial construction works, and could not reasonably do so without possession.
• (g) Landlord's intention to occupy the holding for its own business or residence.

Grounds (a), (b) and (c) are fault grounds: the landlord must prove your breach. Ground (d) requires no fault but does not attract compensation. Grounds (e), (f) and (g) are the no-fault grounds. Even a perfectly compliant tenant with an immaculate rent-payment history can lose on these three — and Section 37 entitles you to statutory compensation when you do.

Section 37 compensation is payable on quitting where the court is precluded from granting a new tenancy solely because of grounds (e), (f) or (g). The default amount is one times the rateable value of the holding; it doubles to twice the rateable value where you or your predecessor in the same business have been in occupation for the whole of the 14 years immediately preceding termination. The rateable value is taken from the valuation list on the date the Section 25 notice (or counter-notice) is served — following the 2023 rating revaluation (antecedent valuation date 1 April 2021), this figure may differ materially from the previous list. For an office with a rateable value of £300,000 and 14 years' continuous occupation, Section 37 compensation is £600,000. This is money most tenants do not know exists.

Ground (f) and the S Franses test. The leading authority on ground (f) redevelopment opposition is S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62, decided by the Supreme Court (Lord Sumption). The test is now known as the acid test: would the landlord intend to carry out the same works if you vacated voluntarily? Where the landlord's works are designed purely to secure possession — conditional on the tenant failing to obtain renewal — the intention required by ground (f) does not exist. An undertaking to the court to carry out the works does not cure a conditional intention. The Supreme Court's decision materially tightened ground (f) in the tenant's favour and is the authority your solicitor should reach for the moment a redevelopment opposition is signalled.

The Interim Rent Most Tenants Ignore Until It's Too Late

While your renewal is being negotiated, you pay rent at the old passing rate. That arrangement suits whichever party benefits from the status quo — and either side can disturb it by applying for an interim rent under Sections 24A to 24D.

How interim rent works. In the most common scenario (landlord granting a new tenancy of the whole of the property, renewal unopposed), Section 24C provides that interim rent defaults to the rent payable under the new tenancy. However, either party may seek a departure from that default by proving a substantial difference between (i) what the rent would have been if set at the date interim rent became payable, and (ii) the rent under the new tenancy as granted. Two recent County Court decisions show how significant that departure can be: in WH Smith v Commerz, interim rent was set at £758,785 per annum against a new tenancy rent of £404,666; in W (No 3) v JD Sports, interim rent was £160,300 against a new tenancy rent of £104,300. In both cases the gap reflected a pandemic-driven market fall between the appropriate date and trial.

The direction of the market determines who benefits and who applies. In a falling market, apply for interim rent. You will crystallise a lower rent immediately rather than paying the passing rate through a prolonged negotiation. In a rising market, the landlord applies for the same reason in reverse. This is a real money decision — tens of thousands of pounds a year in a typical office renewal, considerably more in a large one — and most tenants do not think about it until prompted by their solicitor, often well into the negotiation.

PACT, Mediation and Settling Without a Trial

Most 1954 Act renewals settle. The court is the backstop, not the destination. But the threat of court shapes every negotiation, which means the procedural posture matters from the moment the Section 25 or Section 26 notice lands.

PACT (Professional Arbitration on Court Terms) is the primary ADR route. With the court's consent on an existing renewal application, the parties refer outstanding issues to an arbitrator or independent expert from the RICS/Law Society panel. The arbitrator applies Section 34 and Section 35 as the court would. The advantages: subject-matter expertise (a surveyor-arbitrator with genuine market knowledge) and procedural flexibility (a documents-only determination is possible where the facts are not in dispute). The limitation: PACT can be as slow and costly as court where the appointed adjudicator is inactive. It works best where the dispute is genuinely about rent and both parties want a resolution.

Mediation is increasingly used and court-encouraged, particularly where the Civil Procedure Rules cost-consequences regime gives both parties an incentive to engage seriously. A mediated settlement on a difficult term can preserve a commercial relationship that litigation would destroy.

Calderbank offers (without prejudice save as to costs) are the cost-protection tool in renewal proceedings. Making a reasonable Calderbank offer early and maintaining it through trial can protect you from an adverse costs order if the landlord fails to beat your offer at judgment. See the dedicated Calderbank piece in this series.

The Deadlines That Lose Cases

Procedural deadlines in 1954 Act renewals are statutory. They do not bend. Missing them ends the statutory renewal right and, in most cases, the right to Section 37 compensation.

• Section 25 / Section 26 notice window: served between 6 and 12 months before the proposed termination or commencement date. A notice served outside that window is invalid.
• Section 29A application deadline: no later than the date specified in the Section 25 notice, or the day before the date proposed in the Section 26 request. This deadline can be extended by written agreement under Section 29B, but only if each extension is agreed before the prior deadline expires.
• Section 29B extensions: agree them in writing, in advance, with clear dates. An extension agreed the day after the deadline is worthless.
• Section 64: where renewal proceedings are on foot, the tenancy continues for three months after final disposal of the application. Do not close proceedings without understanding this consequence.
• Negotiating unprotected as a deadline approaches: your landlord has no obligation to tell you that your application window is about to close. "Without prejudice" correspondence, however productive, is not a substitute for a court application or an agreed extension.
• Break clauses near term end: where your lease contains a break option close to the contractual expiry date, the interaction between the break, the expiry and the Section 25 notice window requires specific advice. The positions are not always intuitive.

Every one of these deadlines is fatal if missed. They are not negotiable after the event.

What to Do This Week

If your lease is within two years of expiry and you have not yet instructed advisers, start here.

1. Find the lease, the agreement for lease, any side letters, and all consents to alterations. The complete document set, not just the lease.
2. Confirm whether the lease is contracted out. Look for the Section 38A warning notice and the tenant's declaration (simple or statutory) in the lease recitals, with correct dates. If any of it looks wrong, take advice before assuming either way.
3. Calculate the notice window. Note the contractual expiry date and work out the earliest and latest dates for a Section 25 notice or Section 26 request.
4. Build the improvements evidence file. Collect invoices, construction contracts, licences for alterations, planning consents and completion dates for every fit-out and improvement completed in the last 21 years.
5. Identify the current passing rent and the last rent review date. Pull together whatever market evidence you have access to — heads of terms for recent lettings in the building or nearby, market reports.
6. Note any breach history. Anything that could be relevant to Section 30(a), (b) or (c) grounds needs to be considered before negotiations begin, not after a hostile notice arrives.
7. Consider the landlord's intentions. Any indication of redevelopment or owner-occupation plans puts Section 30(f) or (g) in play and changes the strategy entirely.
8. Start gathering comparable rental evidence. Your surveyor will do this professionally, but the earlier you understand the market context, the better the brief you can give them.
9. Decide on the timing strategy. Serve a Section 26 request to control the clock, or wait for the landlord's Section 25 and respond to their proposed terms. Both approaches have tactical arguments for and against.
10. Take advice before writing anything to the landlord's surveyor. Your first letter sets a negotiating baseline. Once sent, it is part of the record.

Frequently Asked Questions

What is Section 34 of the Landlord and Tenant Act 1954?
Section 34 sets the rent payable under a new tenancy granted on statutory renewal. It requires the court to determine an open-market rent under a hypothetical letting, applying four statutory disregards — most importantly, disregarding the tenant's own occupation and the tenant's own improvements.

What is the difference between a Section 25 notice and a Section 26 request?
A Section 25 notice is the landlord's notice terminating the existing tenancy and (in a friendly notice) proposing terms for a new one. A Section 26 request is the tenant's notice requesting a new tenancy and proposing a commencement date. Only one can be in play at a time.

Can my landlord refuse to renew my commercial lease?
Only on one or more of the seven grounds in Section 30(1). On the three no-fault grounds — (e), (f) and (g) — the tenant is entitled to statutory compensation under Section 37 even without any breach. On the fault grounds — (a), (b) and (c) — the landlord must prove the breach.

What does "contracted out" mean?
Before the lease was granted, the parties followed the Section 38A procedure to exclude security of tenure: the landlord served a prescribed warning notice and the tenant signed a declaration. A contracted-out tenant has no statutory right to renewal and no Section 37 compensation rights.

Are my improvements disregarded when the renewal rent is set?
Yes, under Section 34(1)(c), if they were carried out otherwise than in pursuance of an obligation to the immediate landlord and completed within 21 years before the application to the court. The disregard is lost in practice where the tenant cannot evidence the works.

What is the O'May principle?
The party seeking to change the terms of the current lease on renewal must justify the change. Status quo is the starting point. The authority is O'May v City of London Real Property Co Ltd [1983] 2 AC 726 (House of Lords).

What is interim rent?
Rent payable during the continuation period after contractual expiry while the new tenancy is being negotiated. Either party may apply under Sections 24A to 24D. The default is that interim rent equals the new tenancy rent, but the court can depart from this where market conditions have shifted materially between the appropriate date and trial.

How long can the court order a renewal lease to run?
Section 33 caps the court-ordered term at 15 years. Within that ceiling, the court determines what is reasonable in all the circumstances. Recent County Court decisions have tended toward shorter terms reflecting current market preference for flexibility.

What is PACT?
Professional Arbitration on Court Terms — a joint RICS/Law Society scheme under which parties may refer 1954 Act renewal disputes to an arbitrator or independent expert by consent, applying Section 34 and Section 35 as the court would.

What is the Section 37 compensation rate?
One times the rateable value of the holding as the default; doubled to twice the rateable value where the tenant or a predecessor in the same business has been in occupation for the whole of the 14 years immediately preceding termination.

This Is a Financial Event. Treat It as One.

Renewal is the moment the entire term of occupation gets re-priced. The rent matters — but so does the term, the break, the repair covenant, the alienation wording, the service charge clause, the ESG obligations and the next review mechanism. Every one of those points has a cost, and not all of them will be visible in the headline rent figure.

The framework is statutory. The valuation is technical. The case law is dense and developing — all four County Court decisions discussed above postdate 2021, and the Law Commission's second consultation paper is still to come. Tenants who treat renewal as a procedural inconvenience and engage advisers only when a court deadline is imminent pay for that assumption across the next 5, 10 or 15 years. Tenants who engage early, build the evidence file, understand the statutory disregards and make the Section 35 leverage map work for them do not.

[Talk to our lease renewal team before the first notice lands.]

Sources

Legislation
- Landlord and Tenant Act 1954, Part II — sections 24, 25, 26, 29, 30, 33, 34, 35, 37, and 38A (legislation.gov.uk).

Law Commission
- Law Commission — Business Tenancies: the Right to Renew — first consultation paper published November 2024; consultation closed February 2025; Interim Statement issued; second consultation paper awaited.

RICS and Law Society
- RICS and Law Society — Professional Arbitration on Court Terms (PACT) — the joint scheme for referring outstanding 1954 Act renewal issues to a trained arbitrator or independent expert.

Case law
- O'May v City of London Real Property Co Ltd [1983] 2 AC 726 (HL) — the foundational authority on Section 35; the party seeking to depart from existing lease terms bears the burden of justification.
- Edwards & Walkden (Norfolk) Ltd v The Mayor and Commonalty and Citizens of the City of London [2012] EWHC 2527 (Ch) — calibrates the O'May burden; modernisation of terms can discharge it where the proposed change is genuinely fair and reasonable.
- S Franses Ltd v The Cavendish Hotel (London) Ltd [2018] UKSC 62 — the Supreme Court's acid test for ground (f) redevelopment opposition: the landlord must intend to carry out the same works whether or not the tenant vacates voluntarily.
- W (No 3) GP (Nominee A) Ltd & W (No 3) GP (Nominee B) Ltd v JD Sports Fashion Plc (Nottingham County Court, HHJ Fine, 22 October 2021, unreported) — on the Section 34 disregard of turnover trading; a turnover rent can be appropriate in principle only where turnover rents are the market norm and hypothetical turnover can be reliably established.
- HPUT Trustee No 1 Ltd & HPUT Trustee No 2 Ltd v Boots UK Ltd (Central London County Court, HHJ Dight CBE, 24 May 2021, unreported) — term length and break clauses under Sections 33 and 35; five-year term with year-three break ordered in a structurally uncertain post-pandemic environment.
- WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbH (Winchester County Court, HHJ Richard Parkes QC, 25 March 2021, unreported) — pandemic rent suspension clause; landlord's ESG cost-recovery wording rejected under the O'May burden for opacity.
- Poundland Ltd v Toplain Ltd (Brentford County Court, HHJ Johns QC, April 2021, unreported) — pandemic clause could not be imposed on an unwilling landlord where the O'May burden was not discharged.

This article reflects publicly available statutory and case law material as at May 2026. It does not constitute legal advice on any specific lease or renewal.