Surrendering a protected tenancy? Don’t forget s.38A!

The High Court's decision in Euroresins UK Ltd v TLC Investment Ltd [2026] is a reminder of the need to comply with the provisions of the Landlord and Tenant Act 1954 when settling disputes involving protected business tenancies. 

The court held that a settlement agreement providing for the future surrender of a lease was void because the parties had failed to comply with the contracting-out procedure in section 38A of the Landlord and Tenant Act 1954. This requires the tenant to be served with a warning notice explaining that it is giving up security of tenure and to make a declaration acknowledging this within a specified timeframe (the “Procedure”). 

The dispute arose from a settlement of earlier litigation over the landlord's refusal to consent to an assignment. The parties agreed, through a court order and settlement agreement, that the tenant would a) carry out repair works, the extent of which would be determined by an independent expert; and b) surrender the lease early. The order stated that it would “constitute the sanction of the Court for the purposes of section 38 of the Landlord and Tenant Act 1954 for the efficacy of the agreement to surrender” but the Procedure was not followed.  

 The parties ultimately agreed that the surrender provisions in the order were void but disagreed on whether the entire settlement agreement was also void.  In this case, the independent expert had issued two determinations as to the scope of repair works required (the cost of which was to be shared) and the tenant had undertaken some of those works. 

The court confirmed that failing to comply with section 38A does not automatically invalidate every provision in a wider transaction. On the facts of this case, however, the repair obligations and expert determination mechanism were inseparable from the early-surrender bargain. As a result, the whole settlement agreement was held to be void and the surveyor's determinations were not binding.

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