There are various ways in which a commercial lease can come to an end. This blog looks at various ways in which a commercial lease can be terminated by either the landlord or the tenant and the steps that must be taken in order to comply with legal obligations imposed on the parties.
Effluxion of Time:
Most leases will run until the end of the term as determined by the lease. Ending a commercial lease at the end of the term depends on whether the tenant has security of tenure. Security of tenure is a statutory right provided by section 24-28 Landlord Tenant Act 1954 (LTA) so that at the end of the term the tenant will have the ability to ask the Court for a new lease on similar terms as the current lease and the tenant will be able to continue occupying in the property. For tenants of a commercial property, security of tenure is important because it gives them peace of mind knowing they can invest and grow their business without having to worry about vacating the property at the end of the term of the lease.
If both parties agreed to opt out section 24-28 LTA before the lease was entered into, then when the term of the lease ends, the tenant is required to vacate the premises. If the tenant refuses to vacate the property then Court proceedings may be necessary to regain possession of the property.
A break clause is a clause included within the lease which allows either the tenant and/or the landlord to end the lease early by serving notice on the other. The break clause will usually set out certain conditions which need to be complied with to ensure that the break clause is valid. It is important to obtain legal advice if you are considering serving notice to exercise the break clause as the conditions often make it difficult for the notice to be validly served.
Many leases have a provision for forfeiture. A forfeiture provision allows the landlord to terminate the lease early due to the tenant’s breach of covenant/s contained within the lease. The usual forfeiture events include unpaid rent, breach of repairing obligations, or if the tenant becomes insolvent. Different procedures apply depending on the type of breach. If you believe your tenant is in breach of the lease and you wish to exercise your rights of forfeiture then it is important that the correct procedure is adopted to terminate the lease by forfeiture.
If both the landlord and the tenant are willing to terminate the lease before the contractual expiry date then both parties can enter into a Deed of Surrender. The landlord may seek a sum of money in consideration for accepting the surrender of the lease. A Deed of Surrender has the effect of terminating the lease and will set out the obligations that need to be fulfilled before the lease can be extinguished. It is wise to instruct a solicitor to draft the Deed of Surrender in order to ensure that the formalities are complied with and the lease is validly extinguished.
If you require assistance with terminating a commercial lease before or after the lease has expired, then get in touch with our experienced commercial property team to discuss your options. Call us on 0845 287 0939 or contact us by email.
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