TERMINATING A COMMERCIAL LEASE

If both parties agree to opt out of sections 24-28 of the 1954 Act, before the commencement of the lease, the tenant will be required to vacate the premises at the end of the term. If the tenant refuses to vacate the property then Court proceedings may be necessary to regain possession of the property.

If the parties have not opted out of sections 24-28 of the 1954 Act, then the tenant has security of tenure and the lease will continue after the expiry date providing that the tenant remains in occupation of the property for its business purposes. To terminate the lease in this scenario the landlord or tenant must serve one of the following notices:

• Section 25 notice. If the landlord wishes to terminate the lease and can satisfy one of the grounds in section 30 of the 1954 Act, serving a hostile section 25 notice will prevent the tenant from taking a new lease. Examples of grounds under the 1954 Act include breaching repairing obligations, persistent delays in paying rent, or the landlord redeveloping the property.
• Section 26 notice. If the tenant wants to terminate the lease, a section 26 notice can be served.

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.

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.

At Birch Law our expert solicitors have experience acting for both landlords and tenants when it comes to terminating a commercial lease. There are various grounds upon which a commercial lease can be terminated. There are also various statutory provisions applicable to both landlords and tenants which must be complied with when terminating a lease. It is therefore important for both landlords and tenants that they understand their rights and obligations when it comes to terminating a lease. If you would like a free no obligation discussion with our expert team, please contact us on 0161 669 4621 or by email at sbirchall@birchlaw.co.uk.