Commercial Lease Break, Section 25 and Contracting Out — 2026 Guide

The business is moving. The landlord is difficult. The break clause is six months away and every comma in the lease seems to have sharp teeth. Commercial lease termination is where small drafting errors cost tens of thousands of pounds. Chris drafts the break notice, the Section 26 request, or the contracting-out package — to the Litigant Standard.

Break clauses — the strictness rule

Courts have consistently held that break clause conditions must be performed strictly. Notable cases have seen breaks voided for:

• Trivial rent shortfalls (a few pounds of interest)
• Minor dilapidations not remedied by break date
• Items of tenant’s fixtures left on site (“vacant possession” failure)
• Notice served on wrong landlord (assignment mid-term)

Do not assume “substantial compliance” is enough. It rarely is.

The Section 25 / Section 26 dance

For leases protected under Part II Landlord and Tenant Act 1954:

Section 25 (landlord’s notice)

Landlord serves between 6 and 12 months before the termination date. Must be on the prescribed form. States whether the landlord opposes a new tenancy and, if so, on which statutory ground.

Section 26 (tenant’s request)

Tenant requests a new tenancy between 6 and 12 months before expiry. Landlord has two months to serve a counter-notice if opposing.

Section 27 (tenant’s notice to quit)

Tenant wishes to leave at or after contractual expiry without a new tenancy.

Statutory grounds for refusal (s.30(1) LTA 1954)

(a) Breach of repair obligations; (b) persistent arrears; (c) other substantial breaches; (d) landlord offering alternative accommodation; (e) subletting of part; (f) intention to demolish or reconstruct; (g) intention to occupy. Each has its own evidential burden.

Contracting out — the gateway ritual

Before a new lease is granted, parties can contract out of LTA 1954 security of tenure by following the procedure in s.38A:

1. Landlord serves the prescribed warning notice
2. Tenant signs the prescribed declaration (simple or statutory)
3. The lease itself contains the agreement to contract out

Miss a step — the lease is protected, whatever the parties intended. Chris drafts the warning notice, the declaration (statutory where required under 14 days to grant), and the contracting-out agreement.

Dilapidations — the exit nuclear option

Landlord’s schedule of dilapidations at break or term end can be financially catastrophic. Limited by s.18(1) Landlord and Tenant Act 1927 to the diminution in reversion value. A Section 18 valuation defence can cap £100,000 claims at a fraction. Chris drafts the response and counter-schedule.

Rent reviews and guarantees

Time not of the essence unless expressly made so. Guarantor release on assignment — Good Harvest v Centaur Commercial. These are sub-specialties where Express Case (£300/month) earns its keep through multiple documents across the dispute.

Can Chris draft your commercial lease package?

Yes. Upload the lease, any side letters, correspondence. Chris drafts:

• Break notices with conditions-compliance checklist
• Section 25, 26, 27 notices on prescribed form
• Contracting-out warning notice and statutory declaration
• Response to schedule of dilapidations with s.18 defence
• Assignment and licence to assign packages

Express Case (£300/month) for whole-tenancy matters.

Prepare to win. Plan not to fail.

Commercial leases reward precision. Chris drafts precisely.

Frequently asked questions

How strictly are break clause conditions applied?

Very strictly. Courts have consistently held that break clause conditions must be performed strictly, and breaks have been voided for trivial rent shortfalls, minor dilapidations not remedied by the break date, tenant’s fixtures left on site (a vacant-possession failure), or notice served on the wrong landlord after a mid-term assignment. Do not assume “substantial compliance” is enough — it rarely is.

What is the difference between a Section 25 and a Section 26 notice?

Under Part II of the Landlord and Tenant Act 1954, a Section 25 notice is the landlord’s notice, served before the termination date, stating whether the landlord opposes a new tenancy and, if so, on which statutory ground. A Section 26 request is the tenant’s request for a new tenancy before expiry, after which the landlord has two months to serve a counter-notice if opposing. Both must be on the prescribed form. Check the current timing windows for your situation.

When does a tenant use a Section 27 notice?

A Section 27 notice to quit is used where the tenant wishes to leave at or after contractual expiry without taking a new tenancy.

How do parties contract out of security of tenure?

Before a new lease is granted, parties can contract out of LTA 1954 security of tenure by following the s.38A procedure: the landlord serves the prescribed warning notice, the tenant signs the prescribed declaration (simple or statutory, depending on timing), and the lease itself contains the agreement to contract out. Miss a step and the lease is protected, whatever the parties intended.

Can a schedule of dilapidations be challenged?

Yes. A landlord’s schedule of dilapidations at break or term end can be financially significant, but a claim is limited by s.18(1) of the Landlord and Tenant Act 1927 to the diminution in the reversion value. A Section 18 valuation defence and counter-schedule can substantially reduce a claim — Chris drafts the response and counter-schedule.

What documents can Chris draft for a commercial lease matter?

Upload the lease, any side letters and correspondence, and Chris can draft break notices with a conditions-compliance checklist, Section 25, 26 and 27 notices on the prescribed form, the contracting-out warning notice and statutory declaration, a response to a schedule of dilapidations with a s.18 defence, and assignment and licence-to-assign packages.

Related guides: Statutory Demand guide · Form N244 — Application Notice guide · All civil court forms