Can you renew your lease? It comes down to one paragraph most owners have never read

Rent is your biggest fixed cost after wages, and one paragraph in your lease decides whether you get any say in it. If your lease was contracted out of the Landlord and Tenant Act 1954, then on the day the term ends you have no right to stay, no right to a new lease and no compensation. If it was not contracted out, you have all three. Below: how to tell which one you signed, what each is worth in cash, and what the reform now out for consultation would change. This is England and Wales law. Scotland and Northern Ireland work differently.

Go and find this in your lease

Two things to look for.

In the lease itself: a clause mentioning sections 24 to 28 of the Landlord and Tenant Act 1954, usually saying they are excluded or do not apply. That is contracting out. If it is there, you have no statutory right to renew.

In the file around the lease: a separate notice headed "FORM OF NOTICE THAT SECTIONS 24 TO 28 OF THE LANDLORD AND TENANT ACT 1954 ARE NOT TO APPLY TO A BUSINESS TENANCY", plus a declaration you signed. Contracting out is void unless your landlord served that notice and you made that declaration. If the notice arrived less than 14 days before you committed, the declaration had to be a statutory declaration, sworn in front of an independent solicitor. You would remember doing that.

If none of it is in the file, you may well be protected. Do not bet the business on your own reading, but knowing which question to put to a solicitor turns a day of work into an hour.

How common is contracting out? Landlord-side data given to the Law Commission is the most useful guide we have. Among British Property Federation respondents, holding 22,965 leases between them, 51.7% were contracted out, rising to 82% for leases of up to five years. Five years or less is exactly what a cafe, salon, barbershop or studio signs. That is portfolio data from large landlords rather than a survey of high street businesses, so treat it as a direction rather than your odds. The direction is not comforting.

If you are contracted out

The arrangement is simple and it is not in your favour. On the last day of the term, the tenancy ends. You have no right to a new one, and no compensation for leaving.

Which means every renewal is a negotiation where the other side knows what walking away costs you: your fit-out, your signage, your regulars, the reviews attached to that address, and the cost of finding somewhere else. That is not a legal problem, it is a pricing problem, and it turns up in your margin every time the term runs out.

Start the conversation early. Twelve to eighteen months out you still have time to look at alternatives, which is the only thing that gives the discussion any balance. Three months out you are a captive and both of you know it.

If you are protected, here is what you actually have

Three separate rights, worth different amounts.

One: your tenancy does not just stop. It continues past the contractual expiry date until it is ended by the statutory procedure. Nobody can lock the door on you the morning after the term ends.

Two: you can require a new tenancy, and your landlord can only resist on the grounds listed in the Act. Grounds A to D cover your own conduct or an alternative offer: disrepair, persistent late rent, other substantial breaches, or suitable alternative premises. Grounds E, F and G are the no-fault ones. Ground F is that the landlord intends to demolish or reconstruct the premises, or carry out substantial construction work, and cannot reasonably do it with you in there. Ground G is that the landlord intends to occupy the place themselves, and generally only works if they have owned it for at least five years.

Three: on Grounds E, F and G, you get paid. More on the amount below.

One thing protection does not do is hold your rent down. On renewal the rent is the open market rent for the holding. But read what the Act tells the court to ignore, because this part is genuinely in your favour: the fact that you have been in occupation, any goodwill attached to the premises because of your business, and improvements you made. So the trade you built there cannot be used to charge you more for staying. Landlords quite often argue as though it can.

The cheque, and the clause in your lease that probably does not bind you

Compensation is worked out from the rateable value of your premises, not your rent:

• 1 x rateable value in the normal case
• 2 x rateable value if the premises have been occupied for the same business for the whole of the 14 years immediately before the tenancy ends

The multiplier has been 1 since 1 April 1990. It was 2.25 in the early eighties and 3 from 1985, so the figure you would collect today is the same one the Act started with in 1954.

Say your rateable value is £24,000 and your rent is £36,000. Your landlord opposes renewal to redevelop, and you have been there nine years. You get £24,000. Fifteen years in, you get £48,000. Look your own number up on the free gov.uk business rates valuation service and write it next to your annual rent. That is a ten minute job and most owners have never done it.

Now the part worth checking properly. Standard commercial leases routinely contain a clause excluding your right to that compensation, and the Law Commission quotes one from a widely used precedent. That clause is void, to that extent, once you have occupied the premises for business for the whole of the five years before you are due to leave. So it binds a new tenant and it does not bind a long-standing one. Count from when trading actually started at that address, including a predecessor in the same business, not from the date on your current lease.

The number that moved on 1 April 2026

New rateable values took effect across England and Wales on 1 April 2026, set by reference to open market rents on 1 April 2024. If your valuation went up in April, so did your compensation. If it went down, so did the cheque.

It also means the figure was two years out of date the day it came into force, which is exactly the complaint the Law Commission records: rateable value rests on out-of-date rental values and so does "not even represent current market rents", and compensation is "generally too low". Worth reading alongside what the 2026 business rates changes did to your rates bill, since both hang on the same revaluation.

What is on the table until 16 September

Consultation Paper 275 runs to 67 questions across 13 chapters. Four matter to an owner-operated business.

The short-lease exclusion doubles or quadruples. Today the Act skips tenancies granted for a term of up to six months (unless the lease provides for renewal, or you and any predecessor have occupied for more than twelve months). The Commission provisionally proposes either a two year threshold keeping that twelve-month top-up rule, or a one year threshold scrapping it. Either way, short lets stop being protected by default.

Rolling arrangements would drop out of the Act. Periodic tenancies, the month-to-month or quarter-to-quarter kind, whether written or simply implied by paying rent, are inside the Act today and cannot be contracted out. The paper proposes excluding them entirely. If your fixed term expired and you carried on paying, what you are actually on matters a great deal, and it depends on what came before. That is a solicitor question, and it is now a timely one.

Compensation may be based on your rent instead of your rateable value. The paper asks the question directly, and floats using whichever of the two is higher. On the illustration above, a rent basis takes you from £24,000 to £36,000, or from £48,000 to £72,000 at fourteen years. The Commission also asks whether the 1 and 2 multipliers are right, whether they should be stepped by length of occupation, and whether 14 years is still a sensible cut-off now that five to ten year leases are the norm.

Ground F could get wider. The works that let a landlord refuse you today are demolition, reconstruction and substantial construction. The Commission puts three options for widening that list, including a general "substantial works" test, and asks whether Ground F should expressly cover bringing a building up to the minimum energy efficiency standard for let commercial property. A refurbishment ground would put a lot more high street tenants inside the reach of a no-fault removal.

The model itself is not changing. Contracting out stays. Anyone can respond, and small business responses are thin on the ground in property consultations.

The paragraph a buyer reads before your accounts

If you ever sell, your lease is not a detail. It is often the first document requested and the most common reason a price moves.

Most small business sales are asset sales, which means the lease has to be assigned to the buyer, which means your landlord has a say and usually a fee. A buyer looking at a contracted-out lease with fourteen months to run is being asked to buy a business that might not have premises next year. They will either walk, hold back part of the money, or make the deal conditional on a new lease you do not control. Sitting on a protected lease with a decent unexpired term, and a clear right to assign, removes an entire category of diligence risk.

The deeper point is about where your value sits. Goodwill tied to a doorway transfers only with that doorway. Goodwill tied to your people, your booking system, your membership base and your name travels. That is transferability, and it is the single biggest driver of whether an owner-operated business sells at a decent multiple or does not sell at all.

Two owners, identical profit. One is on a five year protected lease with three years left and named staff who hold the client relationships. The other is contracted out with fourteen months left and is personally the reason people come. They are not worth the same money, and the gap is not small.