Specialist Commercial Property Lawyers
Terminating a commercial lease does not have to be a legal drama. As you will see from our tips, the most important thing is to actually understand what’s in your lease – because that is what governs termination.
And if you consider the following top tips and seek legal advice, then ending your lease should be relatively pain free.
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Tip 1 – Identify the correct party
Before serving a ‘notice to terminate’ on your landlord, ensure that it is coming from the correct party. For example, although you may be the managing director of a company, if the notice appears to come from you personally and does not come from the company the landlord may render it invalid.
Tip 2 – check the correct notice period
When calculating your notice period in relation to your contract end date, be aware of exactly what your lease provision is saying. For example, if your lease contains terms such as ‘including’ or ‘commencing on’ this means that your lease will expire on the day before the date in the relevant year or month. If your lease uses the term ‘from’ it will have started the day after the ‘from’ date.
Tip 3 – make sure you serve any notice correctly
Check the lease for any provisions relating to notice, such as the manner in which, it should be served and within what period of time. If the lease requests that you must serve the termination in writing with 6 months notice, then an email 4 months prior to a proposed termination date will not be legally sufficient. If the lease is silent on this point then s.27(1) Landlord & Tenant Act (1927) provides that you can leave the notice at the landlord’s last known place of business. If you do this, then service of the notice will be deemed at the time, which it was left at this address.
Note however this only applies if hand delivered, if you post the notice then it will be deemed to be received when the landlord physically picks it up.
Tip 4 – check who is the competent landlord
With a tenant termination the notice does not have to be served upon the ‘competent’ landlord. A competent landlord is the original head landlord, for example if a subletting has occurred. A tenant is able to serve a termination notice on the immediate landlord.
Tip 5 – double-check what rent you need to pay
If there is no break clause in the lease and you want to vacate the premises before the contract end date, then your rent paying obligations will continue until that date. If you are not planning on leaving the premises before the contract end date, then you should give notice (subject to any lease provisions) 3 months prior to that date.
Tip 6 – make sure you don’t end up in breach of the lease
Ensure that all your lease provisions have been fulfilled prior to serving the notice. For example make sure that all rent payments are up to date and repair covenants have been complied with. If you have breached any of the terms of the lease then your notice may be rendered invalid.
Tip 7 – avoid a big bill for dilapidations
When you terminate the lease the landlord will inspect the property for damages. It is always a good idea to retrieve an original list of flaws that the property had when you took out the lease for comparative purposes. You should consider how much of your deposit money may be taken if any dilapidations are found. Take photographic evidence of the property in case you have to argue the extent of damage with the landlord.
The question of repair is often the biggest problem with ending a commercial lease – especially if you are subject to a fully repairing lease. Try to make sure that when you vacate the building, it has been properly repaired and maintained. Failing to do so could land you with an absolutely huge bill from your landlord or managing agents – who, unlike you, will have no particular incentive to keep the repair bill down.
If you have any queries on commercial leasehold property or termination clauses, then always seek legal advice from a specialist commercial property solicitor before serving a notice on the landlord. If you fail to correctly terminate your lease, you may find that you inadvertently end up with an expensive and unwanted lease extension.