Termination of Leases – Tips for Tenants
Break clauses in commercial leases have probably received more attention from tenants in the last year or so than at any time since the early 1990s. For tenants seeking to break their leases, here are some pointers:
- Make sure any notice to break the lease is issued by the right person. This may strike you as obvious, but if, for example, your lease is held by your company, the notice will not be valid unless it is issued specifically on behalf of the company. There can be particular issues when the lease has been assigned;
- Issue the notice at the correct time. This will be set out in the lease, but the language of the lease may not make it obvious. A notice period date which runs ‘from’ a stated day excludes that day, whereas one that commences ‘on’ a stated day includes that day;
- Give the notice in the correct form. Usually, a notice must be given in writing and must be delivered in a particular form. For example, if the lease specifies that it must be delivered by post, a fax will not suffice;
- Give the notice to the correct person and in the form set out in the lease and at the correct time. A notice delivered to the wrong person, in the worng form or late will not be valid;
- Ensure you have not breached your lease terms. A notice to break the lease can usually only be given if the tenant has not breached its terms. Make sure that your rent is paid and all other covenants are complied with, otherwise the notice may not be valid; and
- Make sure you have evidence of the state of the premises so that, if a dispute arises over the sum payable for dilapidations, you have the information necessary to support your position. It is normally advisable to agree the position as far as possible with the landlord. Remember that it may be cheaper to get some of the work that is necessary done yourself, rather than by the landlord, where possible.
Lastly, do make sure you comply strictly with the lease terms about vacating the premises. Recently, a tenant who remained in occupation only to fulfil its repairing covenants was deemed to have failed to give the landlord vacant possession. This was despite the fact that the tenant was only in occupation for a short time and had informed the landlord of its intentions. Receiving no response, it assumed that the landlord was in agreement.