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 Pro £88 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

Pro £88 for whole-tenancy matters. Hybrid £1,000 where the rent or dilapidations exceed £100,000 and qualified-reviewer sign-off matters.

Prepare to win. Plan not to fail.

Commercial leases reward precision. Chris drafts precisely.