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Suppose you rent commercial property. In that case, you may be concerned about your landlord’s ability to terminate your lease, particularly if you are concerned about meeting your rent obligations. This article will explain the situations where your landlord can terminate your commercial lease so that you understand the possibilities. The good news is that, although you potentially have mechanisms you can use if you want to end your lease early, there are relatively few reasons your commercial landlord can terminate your commercial lease. This article details these reasons below and explains yours and your landlord’s rights.
Termination of Lease for Breach of Lease Term
If your lease contains a forfeiture clause, your landlord will have the right to terminate your commercial lease if you breach any term of your lease. For example, you may:
- fail to pay the rent amount due;
- sublet the property without permission;
- use the property for a purpose other than agreed; or
- fail to meet your repair or maintenance obligations.
In this situation, the landlord may be able to seek forfeiture of the lease. They can do this by entering the leased property by peaceable means or seeking a court order.
Early Termination Clause or Break Clause
A break clause is a clause in a lease that allows the landlord or tenant to end the lease before the end of the lease’s contractual term. It is usually exercisable at a specific time during the lease. The tenant will typically seek to take advantage of a break clause contained within the lease. However, the landlord may also seek to rely on such a clause to terminate a lease.
Generally, your business tenancy will need to exclude ‘security of tenure’ to take advantage of a break clause. This is a legal right commercial tenants have to seek renewal at the end of the fixed lease term.
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Requesting an Early End to the Lease
If your lease does not contain a break clause and you have not broken any terms of your lease, then your landlord may ask if you are willing to agree to end the lease early. You do not have to agree to this, but your landlord may be willing to provide an incentive to secure your agreement to terminate the lease early. If you decide to agree, you will end your lease through a legal document called a Deed of Surrender. Your landlord should pay your legal costs for this.
Terminating a Lease at the End of the Lease Term
Unless expressly excluded in your lease document, commercial tenants have security of tenure. This means that even after the fixed term of your lease has ended, you have the right to have the lease renewed. However, at this point, your landlord can seek a lease termination by serving a ‘Section 25’ notice. This is a formal notice that explains why they do not wish to renew the lease. Your landlord must have a valid reason for not renewing the lease, such as wanting to use the property themselves or planning to redevelop the property.
Key Takeaways
There are relatively few situations where a landlord may be able to terminate a commercial lease. These include:
- seeking forfeiture of the commercial lease as a result of the tenant’s serious breach of the lease terms;
- taking advantage of an early termination clause (break clause) in the lease;
- giving you notice that they wish to terminate your lease at the end of the fixed lease term; and
- negotiating with you to end the lease early.
Provided you pay your rent in full when it is due and do not breach any of the other lease terms, your landlord will not be able to seek forfeiture of the lease. You will need to read your lease document to check if your landlord can rely on a break clause or early termination clause. If not, then your landlord cannot end your lease until the end of the fixed term, unless you agree to end your lease early.
If you need help with understanding your landlord’s rights under your commercial lease, our experienced commercial property 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
A forfeiture clause in a lease gives your landlord the right to terminate your lease if you seriously breach your lease agreement. If your landlord forfeits your lease, you may be able to seek relief from the court. However, you must usually remedy the breach.
A break clause in a commercial lease is also known as an early termination clause. This clause in a commercial lease sets out the circumstances under which a tenant or landlord can end a commercial lease early. This is usually exercisable at a specific point in the lease term or after a certain period has elapsed.
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