On 8 May 2026, the Court of Appeal upheld the County Court’s judgment that a tenant’s option to renew, when not yet exercised, does not remove a tenant's right to a renewal lease under the Landlord and Tenant Act 1954 (the Act) which provides a qualifying business tenant with automatic security of tenure.
Background
The Act entitles a qualifying business tenant to a renewal lease on expiry of the term of their lease. The case of Caterpillar Property Limited & Anor v Park Cakes Limited [2026] was originally heard in the County Court. Park Cakes Limited occupied two commercial properties under long leases. These leases contained tenant options for renewal of the tenancies for a further term of 10 years. The landlords, Caterpillar Property Limited and Caterpillar Property Holdings Limited, argued that, because these leases contained this contractual option to renew, Part II of the Landlord and Tenant Act 1954 (which usually grants a tenant automatic security of tenure) would be disapplied.
The landlord relied on Section 28 of the Act, which states that where the landlord and tenant have already agreed in writing to the grant of a future tenancy on specified terms and from a specified date, the Act does not apply to the current lease. Instead, the current lease would continue until the commencement of the future tenancy but it shall no longer be a tenancy to which the statutory security provisions apply. This would have meant that Park Cakes Limited would have had no statutory right to renew their lease and negotiations for the new rent would not be within the (tenant friendly) framework of the Act.
However, the County Court held that Section 28 of the Act would not apply in this case, as the tenant’s option to renew in the lease was a unilateral right for the Tenant exclusively, and would only become an ‘agreement’ between the two parties if, or when, that right was validly exercised by service of notice, and subject to compliance with the option conditions.
The Case in the Court of Appeal
The landlord appealed the County Court’s judgment, however the Court of Appeal held that a lease simply containing an option to review, did not automatically equate to an ‘agreement for the grant of a future tenancy’ having been made between the parties. The Court of Appeal agreed with the County Court that an agreement would only be made when the option right was validly exercised, by serving option notice within the required time period on the Landlord.
The County Court’s judgment and the Court of Appeal’s dismissal of the appeal give protection to tenants in ensuring that a tenant will not lose statutory security of tenure just because their lease contains a renewal option which they are yet to, and may never, exercise.
The decision highlights to landlords that Section 28 of the Act is a very narrow exception and should not be relied upon unless an agreement has been made between landlord and tenant. The purpose of the Act, to protect business tenants has been upheld, in this common sense decision. A landlord seeking to resist the renewal of a tenancy under the Act should seek advice as to whether any of the statutory grounds of opposition may apply and the process for relying on these.
