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Ending Your Lease

Have you considered what the legal position is when your commercial lease ends? Do you want to end your commercial lease early?

Have you considered what the legal position is when your commercial lease ends? Do you want to end your commercial lease early?

It seems to surprise a lot of tenants when their lease is about to come to an end.  Strangely enough, many of the landlords are surprised too and the net effect of all this is that once someone has realised that the lease is ending (or perhaps has already ended), the parties find themselves scurrying around trying to ensure that they are able to use the ending of the lease to their best advantage. All of this could be avoided if landlord and tenants would just diarise dates and plan ahead!

When a commercial lease ends, the tenant will usually have to hand the property back to the landlord in perfect condition and may be liable for any breach of such covenants given in the lease.  There can also be tax consequences, especially when it comes to claiming capital allowances, which may affect your decision with regard to the lease.

“Protected” lease vs. “contracted out” lease

Essentially, there are two types of lease that can be granted for business purposes in the UK and the main difference between them us whether or not the tenant has the right to remain in the property after the lease has ended.  The first type is known as a “protected” lease, so called because the Tenant has security of tenure under the Landlord and Tenant Act 1954, which means that they have a right to remain in the property after the lease has ended.

The second type is known as a “contracted out” lease because the parties have agreed in the lease that security of tenure will be excluded.  As a general rule, protected leases are regarded as better for a tenant whereas a contracted out lease is better for the landlord.  In actual fact, the benefits of one type of tenancy over the other depend on the intentions of the parties and the state of the letting market at the time that the lease is coming to an end.

Our dedicated team of solicitors, based in Witney, Oxfordshire, would be happy to answer your questions.

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So how does a tenant or landlord end the lease?

Assuming that the tenant wants to leave, or that the landlord wants to end the tenant’s lease, there are various steps the parties have to take depending upon which type of lease it is.

1. Protected tenancy.

If the landlord wants to end the lease, he must serve at least 6 months’ notice on the tenant, to expire on or after the term expiry date in the lease.  The Landlord’s ability to recover possession is limited but he will in any event be entitled to increase the rent to the new market level.  If the tenant wants to give up possession, there are a number of actions that he can take such as formally serving a notice or simply moving out of the property thereby ensuring that the lease is no longer being occupied by a business and relinquishing the right to renew.

2. Contracted out tenancy.

Essentially this lease will come to an end on the date set out in the lease without the parties doing anything.  However, if the lease has ended, but the tenant continues to occupy, pays rent and the landlord actually accepts it, the formerly contracted out lease can be magically converted into a protected tenancy.  This can cause a lot of problems and is best avoided if at all possible – unless you are the tenant!

Can we end a lease early?

Leases can also be ended early by agreement between the landlord and the tenant and there are circumstances in which the landlord can forfeit the lease if, for example, the tenant fails to pay the rent on time.  If your lease is not ending but you need to dispose of your lease, this may be possible depending upon what you agreed on the subject at outset. Remember that if you assign or sublet the lease you will have to meet the landlord’s requirements and will probably have to pay the landlord’s costs in the matter too.

Whatever option is adopted in ending your lease, both parties need to know what to do and when.  Everyman Legal can advise you on what an upcoming lease termination will mean and what your options will be – it is best to contact us in plenty of time for this sort of legal advice. Otherwise, we will be able to help you respond effectively to whatever situation you are faced with.

For more information on ending your lease...

Please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 for a free discussion or email natalie.hopkins@everymanlegal.com

The Everyman Legal team acted promptly and with us in mind. We were treated as an important client even though the services for the transaction were fairly routine. They always went the extra mile to keep the process moving efficiently.