Statutory compensation for business tenancies

Statutory compensation for business tenancies

The Valuation Office Agency has updated the rateable values of all business, and other non-domestic, property in England and Wales. These future rateable values will take effect from 1 April 2023.

The change in rateable values affects how much statutory compensation can be claimed under the Landlord and Tenant Act 1954 (“1954 Act”). Landlords and tenants should note this change closely when considering the timing of requests and notices under the 1954 Act.

| Statutory compensation for business tenancies

The main aim of the 1954 Act is to provide business tenants with the right to renew their lease on the expiry of the contractual term. However, a landlord can oppose this renewal on certain specified grounds.

Under section 37 of the 1954 Act, the tenant is entitled to statutory financial compensation for the disturbance to their security of tenure rights where the landlord relies on one or more of the no-fault grounds of opposition including:

  • Ground (e) – where the landlord requires possession of the holding for the purpose of letting or otherwise disposing of the property as a whole.
  • Ground (f) – where the landlord intends to demolish or reconstruct the premises comprised in the holding, or a substantial part of them, or to carry out substantial work of construction.
  • Ground (g) – where the landlord intends to occupy the holding for the purposes, or partly for the purposes of, a business to be carried on by him, or as his residence.

The statutory compensation is paid when the tenant vacates the property, whether it is voluntarily or following a Court order.  The amount payable is dependent on the rateable value of the property and the length of time the tenant (and any predecessor in title carrying on the same business) has been in occupation of the property.

| Business rates changes

The date that a landlord serves its opposed section 25 notice or serves a counternotice to a section 26 request (opposing renewal) fixes the date on which the rateable value is determined for calculating statutory compensation.

If a landlord serves its notice relying on a no-fault ground on or after 1 April 2023, it could be liable for a drastically different compensation figure than if it serves the notice before that date.

Any landlords considering opposing leases that expire within the next 12 months, need to review the current and new rateable values for the property in question to assess whether to serve notice before or after the rate change to minimise the compensation payable.

Likewise, any tenants who think their landlord may have redevelopment plans should consider the rate changes to assess when to serve their section 26 request in order to maximise the compensation they receive.

If you would like some more information about Statutory Compensation, please call us on 0800 988 7756 or email us on We’re here to help.


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