I’m a tenant, get me out of here! In house lawyers forum – March 2015

• break rights

• alienation: assignments & underlettings

• surrender

• term expiry

• exit considerations

• purpose: allows a lease to be

terminated before expiry of the

contractual term

• caution: conditions must be complied

with strictly – not good enough to be

‘almost there’

• be warned - landlords can (and do!) try

everything to argue that a tenant’s

break option has not been validly

exercised

Conditions

• ideally a break right should be

unconditional

• often, however, landlords insist on at

least one or two conditions, such as

– payment of rent

– material compliance

– vacant possession

Conditions continued

• payment of rent

– is a full quarter required?

– example: a lease contains a break option

with a break date of 25 March 2015,

conditional on payment of rent up to the

break date. Rent is payable quarterly. Is

the tenant obliged to pay the rent due

on the March quarter day?

– other sums, e.g. service charge,

insurance premium, interest?

Conditions continued

• material compliance

– be very wary of agreeing to this!

• vacant possession

– best practice - ensure all of the tenant’s

goods, belongings, etc. are cleared from

the premises on or before the break date

Assignment & underletting

• what does the lease allow?

– absolute bar

– partial bar (or ‘qualified covenant’)

Assignment & underletting

• consent - when is it unreasonably

withheld?

– refused

– delayed

– conditions

Assignment & underletting

• statutory duties

– principal duty is to give consent (within

a reasonable time)

– written notice (within a reasonable time)

– pass on an application to anyone whose

consent is also needed (e.g. superior

landlord, mortgagee)

Assignment & underletting

• pre-conditions - are they valid?

• common pre-conditions

– AGA

– assignee to provide acceptable surety

– no rent arrears

– any underletting must be at market rent

– any underletting must follow the same

format as the lease

Assignment & underletting

• landlord can impose additional

conditions

Assignment & underletting

• what if consent is refused?

– is it reasonable?

• what if consent is unreasonably

withheld?

– proceed anyway

– apply to court for a declaration

– claim damages

Assignment & underletting

• top tips for a successful application

– in writing & sent to correct person

– include all relevant information

– include references & last three years

accounts for proposed assignee / sub-

tenant

Assignment & underletting

• top tips for a successful application

– deal with any pre-conditions explaining

how they have been met

– detail any special requirements

– confirm you will pay landlord’s

reasonable costs

• consensual arrangement - neither party

can force the other to accept a

surrender

• effect - release tenant from any future

liability (note: historic liability remains)

• terms - no requirement to act

reasonably! Common landlord

requirements

– payment of a premium

– compensation

– replacement tenant

• tenant can walk away from the lease

• notice?

– advisable to give written notice, even if

not strictly required

• implications of the Landlord and Tenant

Act 1954

– lease will automatically continue if

tenant remains in occupation beyond

expiry of the contractual term

– 3 months notice (section 27)

• vacant possession

• check if there are any outstanding

liabilities, for example is there an

outstanding rent review? Avoid costly

surprises!

• an important consideration in deciding

whether to vacate is the cost

implications of that decision, which can

often be greater than initially

anticipated

• some things to think about

– dilapidations

– reinstatement

– relocation costs

• basis: a landlord is entitled to be

compensated for the tenant’s breaches

• close scrutiny of the lease is crucial –

what is the tenant responsible for?

• LTA 1927 section 18 - cap on value

• other considerations

– loss of rent claims

– what is the landlord’s intention for the

premises post lease expiry?

• often part of the claim for dilapidations

• what were the terms of any fit out

works carried out at the start of the

lease?

• speak to the landlord early on - can a

deal be done?

Get in touch if you have any questions or

would like further information.

t +(0)121 237 3937

e pamela.shepherd@brownejacobson.com