Terminating a Commercial Lease
A lease is a contractual agreement between a tenant and a landlord, so if either party wants to terminate a commercial lease, it can be complex.
Our commercial property disputes solicitors advise landlords and tenants on ending a commercial lease; providing common sense solutions tailored to their business needs. Our lawyers work with clients across Bristol and the surrounding area in Bedminster, Bishopston, Bristol city centre, Kingswood and Thornbury.
How Barcan+Kirby can help
Whether you are a landlord or a tenant, our commercial property disputes solicitors can advise you on the correct procedure for ending a commercial lease and the legal implications.
The termination of a commercial lease can be complicated and time-consuming, and disputes can arise. Our expert lawyers have the expertise to ensure the process is fair and transparent, and we aim to resolve any dispute that develops outside of court where possible.
Terminating a commercial lease
There are various options available to both a landlord and tenant to terminate a commercial lease. It is always best to seek legal advice, as there are various requirements to meet and termination will only be applicable in specific circumstances.
Ways to terminate a commercial lease include:
By break notice
If applicable, this will allow either or both the landlord and tenant to terminate the lease early. Whether this is an available option is dependent on whether the lease contains a break clause.
The provisions of a break clause are usually strict and require notice to be served in accordance with the term; otherwise, the option to terminate the lease early is lost. It is therefore best to seek early legal advice from a solicitor who specialises in commercial property disputes.
Forfeiture
If the lease has a forfeiture clause and the tenant is in breach, i.e. the tenant has failed to pay rent or meet other lease obligations, the landlord can take steps to forfeit (terminate) the lease early.
The process for the forfeiture of a commercial lease depends on how the tenant has breached its terms.
If you are a tenant and your landlord is in breach, forfeiture is not an option for you. However, you can take steps to enforce your lease.
Negotiation/surrender of a lease
A landlord and tenant can agree to end the lease early. In this circumstance, a deed of surrender is advisable, and the requirements will be dependent on the terms of the lease, including whether it is within the Landlord and Tenant Act 1954.
Both landlord and tenant will also want matters such as dilapidations to be considered and dealt with, within the deed. It is also not uncommon for the landlord to seek payment in return for agreeing on the request for early surrender.
Serving notice opposing the grant of a new tenancy
If the lease is within the Landlord and Tenant Act 1954, both landlord and tenant need to be aware of the tenant’s right of continued occupation when considering terminating the lease.
When terminating a lease, the landlord will need to serve a section 25 notice or ensure they respond to a section 26 notice, if received. Read more about section 25 and section 26 notices here.
If you are unable to locate or correspond with your landlord, or as a landlord you believe your tenant has vacated within the fixed term of their lease without informing you, our commercial property disputes lawyers can advise you on your options.
FAQs
If you want to terminate your commercial lease early as a tenant but do not have a break clause, you may be able to negotiate this with your landlord, although, as mentioned above, you may be required to pay a fee.
It is important to seek legal advice before terminating your commercial lease; an experienced solicitor can advise you on your legal and contractual obligations.
The most straightforward way to terminate a commercial lease before its term ends and without paying a penalty fee is to exercise the break clause. If there is no break clause, you may be able to negotiate an early exit with your landlord.
When negotiating a commercial lease, whether you’re a landlord or tenant, it is worth thinking about including a break clause to provide greater flexibility for both parties.
Break clauses allow landlords and tenants some flexibility to end a commercial lease before it reaches full term if you give sufficient notice.
If the lease contains a break clause, this will dictate how much notice the landlord has to give. In the absence of a break clause, the landlord might agree to end it early (‘surrendering the lease’) or transfer it to someone else (‘assignment of the lease’).
If the above does not apply, tenants are obliged to pay rent for the whole tenancy period.
Many landlords and tenants presume that when a commercial lease term ends, it is terminated. This is not the case if the lease gives the tenant security of tenure (under The Landlord and Tenant Act 1954).
If the tenant has security of tenure, the landlord or tenant can terminate the lease by serving a section 25 or section 26 notice. Read more here.
If a landlord wants to end the lease but the landlord has security of tenure, a section 25 notice prevents the tenant from starting a new lease. The grounds for a section 25 notice include breaching repairing obligations and a repeated delay in paying rent.
A tenant with security of tenure can terminate or renew a lease by serving a section 26 notice.
Contact our commercial lease solicitors in Bristol
For straightforward advice on terminating a commercial lease, get in touch with our commercial property solicitors. For a no-obligation chat, call us on 0117 325 2929 or fill out our online enquiry form.