Lease Terminations

Lease Terminations FAQS

Below, we have answered some frequently asked questions concerning lease terminations

• How can you terminate a protected tenancy?

  Where the tenancy is protected under the Landlord and Tenant Act 1954, it can only be brought to an end using one of the prescribed methods. For the avoidance of doubt, termination of the lease in this context is different from bringing the tenancy to an end for the purposes of requesting a renewal tenancy.

  To bring a protected tenancy to an end, the parties may either:

  1. Serve notice on the other party under Section 27 of the Act; or
  2. Agree a surrender of the tenancy (usually by deed).

  In addition to the above, the landlord can also serve notice on the tenant under Section 25 of the Act to bring the tenancy to an end but oppose the grant of a new tenancy in certain prescribed circumstances.

  Whilst there is no prescribed form of notice under Section 27, care must be taken to ensure that the notice does not expire within the contractual term of the existing lease and that the correct period of statutory notice is given. Failure to do so will make the notice invalid.

  As to surrender, the landlord is still required to serve a notice on the tenant under Section 38A to deal with the consequences of Part II of the Act and, in certain circumstances, the tenant will be required to swear a statutory declaration to avoid the surrender deed being deemed to be void.

  At Nelsons, our expert Property Disputes team are highly experienced in drafting and serving notices, deeds of surrender and statutory declarations that comply with the requirements of the Act. Likewise, we are experienced in identifying defects in such notices which can provide a tactical advantage during lease termination negotiations.

• How do you end a non-protected tenancy?

  As a starting point, business tenancies which are not protected under Part II of the Act will automatically come to an end upon the expiration of the contractual team. If a tenant wishes to remain in occupation after this time, it is important that the parties understand what the status of the occupier will be so as to avoid inadvertently creating a protected tenancy. Within the term itself, parties are given much more flexibility to agree a surrender of the tenancy on agreed terms.

  Surrender by operation of law usually occurs when the parties act in a manner which is inconsistent with the continuation of the business tenancy. Often this will involve some “positive” act on the part of one party, such as the tenant handing the keys to the premises back to the landlord.

  A word of caution, though, that often regard will have to be given to all of the circumstances surrounding an alleged act of surrender before surrender by operation of law can be confirmed. It is therefore vital to take advice before acting upon such an act to avoid the risk of a claim of unlawful eviction.

• How can a Section 25 Notice be used to terminate a protected business tenancy?

  In addition to Section 25 of the Landlord and Tenant Act 1954 being used in the context of commercial lease renewals, it can also be used as a tool to terminate a protected business tenancy in certain prescribed circumstances.

  Where a commercial landlord wishes to terminate a business tenancy (on or following the expiration of the contractual term) in circumstances where they oppose the grant of a new tenancy to the tenant, they can serve a special form of Section 25 Notice to bring the tenancy to an end and set out their grounds of opposition for renewal.

  The grounds of opposition are limited and are set out within the Act. The most common grounds used include:

  • Persistent delay on the part of the tenant in paying their rent;
  • That there are other “substantial breaches” on the part of the tenant in respect of complying with their lease obligations;
  • That upon the termination of the current tenancy the landlord intends to demolish and/or re-construct the premises; and/or
  • That upon the termination of the current tenancy the landlord intends to occupy the premises themselves for the purposes of a business.

  It is important to note that the tenant may challenge the grounds of opposition put forward by the landlord and apply to the Court for a new tenancy.

  Tactically, the tenant may wish to issue proceedings very soon after receiving the Section 25 Notice, so it is essential that the landlord receives the correct advice before the Notice is issued. This is because the landlord must be able to prove that their grounds of opposition are made out at the date of the hearing.

  Depending on the ground relied upon, the landlord will obviously have to prove different things but, using the demolition/re-development ground as an example, they should be able to prepare, as a minimum, to prove at the hearing that:

  • They have an intention (and an ability, particularly in terms of having funding available) to undertake the proposed works; and
  • The proposed works are due to commence within a reasonable time (i.e. “not too long”) after the hearing date.

  It is also important to note that where a landlord relies on a “no-fault” ground of opposition, the tenant will be entitled to statutory compensation from the landlord. Redevelopment is an example of a no-fault ground and so, upon vacation (either by agreement or Court order), the tenant will be entitled to compensation of:

  • An amount equal to one x the rateable value of the property if they have been in occupation of the premises for less than 14 years; and
  • If the tenant has been in situ for longer than 14 years, an amount equal to two x the rateable value of the premises.