In Short
- Your landlord can terminate a commercial lease early for reasons such as rent arrears, breach of lease terms, or illegal use of the property.
- Forfeiture allows a landlord to take back possession of the property if you breach the lease, often after serving a Section 146 Notice.
- The Landlord and Tenant Act 1954 provides tenants with rights to request lease renewal at the end of the term unless contracting out.
Tips for Businesses
Always review your lease agreement to understand your rights and obligations regarding early termination. If you’re facing potential forfeiture, seek legal advice immediately. If rent arrears are an issue, remember that your landlord must provide a seven-day notice before taking further action under Commercial Rent Arrears Recovery (CRAR).
When you enter a commercial lease, the obligations on you and your landlord will become binding. This means that a breach of this agreement on your part could have serious consequences, either under common law or according to the terms of your agreement with the landlord. You must comply with your obligations to the landlord, or they may wish to terminate the lease. This means that you will lose access to your premises, and the landlord may have additional rights in relation to your breach. However, you also acquire rights under the commercial lease agreement and by law, which can require the landlord to follow certain procedures or timelines which you should be aware of. This article will explore the key legal rights of commercial tenants facing early termination of their lease in the UK.
This cheatsheet includes practical tips to understand key clauses and avoid disputes in leasing agreements.
Can My Landlord Terminate My Lease?
When you sign a commercial lease agreement for your business premises, it will detail the lease end date. You may be concerned about your commercial landlord forcing you to leave their commercial property before the lease term ends. This would require you to vacate your current premises and find a new location to operate your business.
The landlord can end the lease early for a number of reasons, for example, by exercising a break clause. Alternatively, the landlord could forfeit the lease. This situation may occur, for example, when you:
- are in rent arrears;
- breach a lease term; or
- use the commercial property for something illegal.
Can My Landlord Ask Me to Leave Once My Lease Expires?
As a commercial tenant, start by reviewing your lease agreement to understand your rights regarding termination.
As a business tenant, you may have certain rights under the Landlord and Tenant Act 1954. This allows you to request a renewal lease at the end of the original term. The landlord can oppose it on specific grounds. This also allows the landlord to terminate your lease only after the original lease term ends, not during.
Depending on your lease terms, you may be ‘contracting out’ of the Act, which means rejecting your statutory rights. This is common, meaning you must renegotiate the lease to remain in the property. If this is not done, the landlord can ask you to vacate the property.
If you are concerned about the landlord terminating your lease during the original term, forfeiture is likely the issue.
Continue reading this article below the formWhat is Forfeiture?
Forfeiture is when a landlord takes back possession of their property, and the commercial lease will immediately end. Your landlord can do this either through peaceable re-entry of their commercial property or through the court.
Usually, forfeiture will be exercised where a tenant has been persistently/significantly breaching the terms of their lease. For example, if you do not pay your rent, or if you do not comply with your repair obligations.
The landlord’s right to forfeit for non-payment of rent is statutory. They must give prior notice via a s146 notice. For any other breach of the lease, the landlord will have the right to forfeit if the lease explicitly grants them this right on the relevant grounds. No notice is required for this, although the lease can specify otherwise.
A written notice (Section 146 Notice) will set out the breach and may refer to a reasonable period within which you will have to remedy this breach (if capable of remedy).
Also, once your landlord begins forfeiture procedures, they cannot ask you for the rent you owe, as this means they acknowledge the lease continues to exist. Additionally, if you experience an insolvency event, your landlord cannot forfeit the lease, which sometimes applies if they have begun forfeiture procedures.
However, lease agreements will usually state that forfeiture is exercised without forfeiture to any other right/remedy that the landlord may have in relation to a pre-existing breach of the lease. This means that the landlord will usually try to recover its losses from any breach, even if it has forfeited the lease.
Commercial Rent Arrears Recovery (CRAR)
Your commercial landlord might attempt the Commercial Rent Arrears Recovery (CRAR) process due to your rent arrears . In that case, you have the legal right to seven days’ notice before a bailiff tries to seize your goods.
Your landlord can only use the CRAR process if your rent is at least seven days in arrears and cannot use it to recover other costs, such as service charges or insurance rent.
Key Takeaways
If you are a tenant facing the unfortunate prospect of your landlord terminating your lease early, be aware of your legal rights. Your landlord may be able to terminate the lease in certain instances where you break your lease terms, such as for non-payment of rent. However, there are rules governing when and how the landlord may exercise this right to forfeit the lease.
If you need help understanding your rights when facing this situation, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Your landlord may have a break clause in their favour, or they may be able to terminate the lease before the end of the term on certain grounds.
As a commercial tenant, you have some legal rights when you face this situation. For example, the right to apply to the court for relief.
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