Landlords and Tenants should be aware of the impact of the revision of rateable values on the compensation payable in hostile lease renewals.
The upcoming revision of rateable values by the Valuation Office Agency, effective from 1 April 2026, will have important consequences not only for business rates but also for statutory compensation under the Landlord and Tenant Act 1954 (1954 Act). Statutory compensation may be payable to tenants whose right to renew their tenancy is opposed by their landlords under certain grounds under the 1954 Act. The grounds include where the landlord intends to redevelop or occupy the premises themselves. These “no fault grounds” can entitle tenants to compensation when a landlord refuses to renew their lease.
When compensation is calculated, a statutory multiplier to the rateable value in force on the date the notice is served is applied. Both landlords and tenants must now factor in these changes into their lease renewal strategies especially for Landlords where a no fault ground is relied upon under section 30(1) of the 1954 Act. Whether compensation will increase or decrease after 1 April 2026 will be dependant on the properties’ rateable value after this date. Rateable values are generally on the rise, with particular emphasis on industrial, manufacturing, logistics, offices and hospitality [albeit the Government has tried to provide additional relief for pubs].
Timing is critical. For landlords, adjusting their timing of service of a section 25 notice or counternotice in order to minimise exposure to compensation will need to be considered. For tenants, tactical service of a section 26 request either before or after the revaluation date may ensure the more favourable rates applies if the landlord intends to serve counter-notice relying on one of the “no fault grounds”. As a tenant, most will benefit from serving a s.26 request prior to April.
It is essential that both landlords and tenants check how their property is affected and adjust their approach accordingly. While the revaluation is only one of several factors influencing renewal strategy, it could prove financially significant for landlords intending to oppose renewal on grounds that trigger compensation. Careful planning now, ahead of April 2026, will ensure that both landlords and tenants are prepared for the implications of the new Rating List.
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