Landlords can try and forfeit a lease if a tenant is in breach of their obligations (this assumes that the lease document includes a right to forfeit). If a tenant fails to pay the rent on a commercial premises, or commits another serious breach of the lease covenants, by sub-letting the property without the landlord's permission for example, this may lead to forfeiture, where the landlord has the right to re-enter the property and the lease agreement is automatically terminated. Landlords should seek legal advice so that the consequences of any action they plan to take are clearly understood at the outset.
The Landlord and Tenant Act 1954 provides commercial tenants with some degree of security of tenure when the fixed period of their lease comes to an end. A tenancy will be protected, and in principle the tenant will have the right to renew their lease on similar terms, if the fixed period of the lease is over 6 months, or if they have occupied the property for over 12 months. How does a landlord terminate a tenancy protected by the 1954 Act? The landlord will need to serve a section 25 notice on their tenant, including legitimate reasons why they will not agree to the lease being renewed. The grounds on which a landlord may justify non-renewal of a lease include the failure of the tenant to abide by its covenants, or fixed plans for redevelopment of the property.
If a commercial lease contains a break clause, either or both parties to the agreement may seek to terminate the lease before its fixed period has ended. Landlords may seek to have a break clause inserted in a lease if they have future plans to redevelop a property, plans to occupy it for their own business purposes, or simply wish to keep their commercial options open. How does a commercial landlord enforce a break clause? The lease will normally need to be excluded from the security of tenure provided by the Landlord & Tenant Act 1954 (see above). If the landlord has statutory grounds for opposing lease renewal however, such as redevelopment plans, they may still be able to counter a protected tenant's attempts to renew, and make a break clause effective.
Landlords may be able to negotiate a deed of surrender with their tenant, a document under the terms of which both parties agree to bring a lease to an early end. Solicitors specialising in deeds of surrender are invaluable to commercial landlords. Firstly the documents must be carefully drafted to cover important points such as making certain that a tenant leaves on a defined date, ensuring that they abide by their obligations and liabilities under the terms of the commercial lease until they do so, and paying the landlord's legal costs! When seeking to reach consensus on a deed of surrender, a landlord may need to consider paying their tenant a premium, if the terms of the lease are particularly favourable to the latter, and they are unwilling to surrender the property without some sort of incentive.
Landlords aiming to end a commercial lease early should take the advice of a specialist commercial property solicitor to find out the best way for them to proceed. This is a complex area of law, and many lease terms and clauses will be open to differing interpretations. Contact our firm of solicitors offering free advice to landlords on ending commercial leases.