Termination of leases (week 10)

Effluxion of time

Lease ends automatically when the contractual term expires

Holding over

Protected business tenant’s right to remain in occupation after the contractual term ends

Break clause

Clause allowing a fixed-term lease to end early if a party takes the required positive action

Tenant at will (post-expiry)

If an unprotected tenant stays on with landlord consent (but without rent acceptance creating periodicity), the arrangement is a tenancy at will

Periodic tenancy (by rent acceptance)

If landlord accepts rent after expiry, tenancy at will may become a periodic tenancy (e.g. monthly)

Security of tenure risk (post-expiry rent)

If a periodic tenancy arises and premises are occupied for business purposes, the tenant may gain LTA 1954 protection

Break clause effectiveness

Break is only effective if exercised in accordance with the clause requirements

Tenant break and protection

If tenant exercises break, it ends the lease even if the tenancy is protected

Landlord break and protection

If landlord exercises break, it ends the contractual term but a protected tenant may still hold over

Landlord break and contracting out

For landlord break to end occupation where lease would be protected, the lease must be contracted out of LTA 1954

Notice to quit

Notice used to end a periodic tenancy (cannot be contracted out)

Weekly tenancy notice

Notice period is 4 weeks for residential weekly tenancies and 1 week for other weekly tenancies

Monthly tenancy notice

Notice period is 1 month

Quarterly tenancy notice

Notice period is 1 quarter

Yearly tenancy notice

Notice period is 6 months

Notice expiry timing

Notice to quit must expire on the first or last day of a tenancy period

Tenancy period dates

If tenancy runs 15th to 14th, notice may need to expire on the 14th or the 15th depending on the period definition

Notice to quit (landlord) and security of tenure

Landlord notice to quit ends the periodic tenancy but does not remove protected status; tenant holds over

Notice to quit (tenant)

Tenant can serve notice to quit whether the tenancy is protected or not

Recovering possession from protected periodic tenant

Landlord must serve a hostile section 25 notice relying on statutory grounds

Section 25 doubling as notice to quit

A section 25 notice can also operate as notice to quit if it expires on the first/last day of the tenancy period

Section 26 restriction (protected periodic)

Protected periodic tenants cannot start renewal by serving a section 26 request

Surrender

Lease ends early by agreement between landlord and tenant

Express surrender

Surrender effected by deed terminating the lease by agreement

Reverse premium

Payment by tenant to landlord on surrender where landlord loses benefit of remaining rent

Surrender by operation of law

Surrender implied where parties’ conduct is inconsistent with continuation of the lease (e.g. landlord accepts keys as permanent return)

Surrender and protection

Surrender is effective even if the tenancy is protected

Agreement to surrender (protected tenancy)

If surrender is agreed in advance for a protected tenancy, statutory notice/declaration procedures similar to contracting out must be followed

Merger

Lease ends when leasehold and superior interest come into common ownership (tenant buys freehold or one person acquires both interests)

Merger and protection

Merger ends the lease whether protected or not

Landlord remedies

Methods available to landlord depending on breach and lease terms

Damages (tenant breach)

Landlord can sue for damages for breach of contractual tenant covenants to put landlord in position as if breach had not occurred

Repair covenant damages issue

Damages for repair breaches involve special rules and can be limited

Action in debt

Claim for fixed sums due (rent, service charge, insurance rent) as a debt

Rent arrears limitation period

Landlord can recover only rent due within the last 6 years

Ground rent arrears (long leases)

Long leases can accumulate historic ground rent arrears, but recovery is time-limited

Former tenant/AGA route

If current tenant is assignee, landlord may pursue former tenant under AGA where applicable

Guarantor

Third party who guarantees tenant’s obligations and can be pursued for landlord losses under guarantee terms

Guarantee scope

Guarantees usually cover all tenant obligations, not only rent

Rent deposit

Sum held by landlord (often up to 6 months’ rent) to cover tenant defaults

Rent deposit drawdown

Landlord may draw on deposit if arrears arise

Top-up obligation

Tenant must replenish the rent deposit after landlord draws from it

CRAR (Commercial Rent Arrears Recovery)

Statutory self-help method (since 2014) allowing enforcement agent to take control of goods for unpaid rent

CRAR scope

Available only for purely commercial premises (not mixed-use)

CRAR rent threshold

At least 7 days’ principal rent must be owed to use CRAR

Principal rent (CRAR)

Rent including VAT and interest but excluding service charge

CRAR and forfeiture

CRAR can only be used if the lease has not been forfeited

Enforcement agent (CRAR)

Landlord must appoint a certified enforcement agent or an exempt person

CRAR notice period

Enforcement agent must give 7 clear days’ notice before entering (excluding Sundays and bank holidays)

CRAR notice contents

Notice must state amount owed, how to pay, enforcement powers, and agent contact details

Taking control of goods

After notice expires unpaid, agent can enter and seize/control goods up to value of debt

Sale notice (CRAR)

A further 7 clear days’ notice is required before selling seized goods

Equitable remedies

Discretionary remedies such as specific performance and injunctions, used less often

Specific performance

Order compelling tenant to do a required act, rarely granted except exceptional cases (e.g. repairs where no adequate alternative)

Injunction

Order restraining tenant from doing an act, potentially used to prevent unlawful assignment before it occurs

Forfeiture

Landlord’s right to re-enter and end the lease early (including during holding over)

Re-entry

Alternative term for forfeiture

Forfeiture clause requirement

Forfeiture is only available if the lease expressly provides it

Forfeiture grounds (common)

Non-payment of rent, breach of covenant, and insolvency events

Grace period (rent forfeiture)

Lease may require a period to pass before forfeiture for rent arrears

Section 146 notice

Statutory notice required before forfeiture for non-rent breaches, specifying breach and allowing reasonable time to remedy

No s146 for rent

Forfeiture for non-payment of rent does not require a section 146 notice (subject to lease terms)

Insolvency event clause

Lease provision allowing forfeiture on events indicating financial difficulty (e.g. receiver, IVA/CVA, bankruptcy)

Peaceable re-entry

Forfeiture by changing locks without court order, usually via bailiff, with legal and damage risks

Court forfeiture

Forfeiture through court proceedings, slower and more costly but more secure legally

Waiver of forfeiture

Loss of right to forfeit where landlord, knowing of breach, does an unequivocal act recognising the lease continues and communicates it to tenant

Waiver intention irrelevant

Landlord’s subjective intention does not matter if conduct amounts to waiver

Unequivocal act

Act that clearly treats the lease as continuing (e.g. demanding/accepting rent after breach)

Once-and-for-all breach

Single event breach where waiver permanently loses forfeiture right for that breach

Examples (once-and-for-all)

Non-payment of rent, unlawful assignment/underletting, insolvency event

Continuing breach

Breach that continues day to day, giving landlord a fresh right to forfeit each day

Examples (continuing)

Failure to repair, breach of user covenant, breach of insurance obligation

Relief from forfeiture

Court’s discretionary power to reinstate the lease as if forfeiture never happened

Relief timing

Tenant can apply for relief once s146 is served or forfeiture proceedings start

Relief aim

Court seeks to restore parties to pre-forfeiture position

Relief for rent arrears

Normally granted if tenant pays all arrears plus landlord’s costs

Relief applicants

Mortgagees and under-tenants may also apply for relief

Under-tenant outcome on relief

Under-tenant may become direct tenant of the landlord if lease structure requires

Repair breach as special case

Law treats repair breaches more generously to tenants because breaches are common and usually remediable

Forfeiture for repair breach

Requires section 146 notice and reasonable time to remedy

LPRA repair protections

Special regime restricting forfeiture/damages for repair breaches in qualifying leases

LPRA qualifying lease

Lease term of 7 years or more with at least 3 years unexpired triggers tenant counter-notice rights

Counter-notice (LPRA)

Tenant has 28 days to serve a counter-notice once s146 notice served for repair breach

Court permission requirement (LPRA)

If counter-notice served, landlord needs court permission to proceed with forfeiture

s146 LPRA information duty

Landlord must tell tenant about LPRA counter-notice rights in the s146 notice

Damages for repair breach (timing)

Landlord cannot claim repair damages until s146 served and 28-day counter-notice window has passed

Damages measure (repair)

Damages limited to diminution in value of landlord’s reversion, not the cost of repairs

Diminution in value

Reduction in value of landlord’s interest caused by disrepair (can be far less than repair cost)

Jervis v Harris clause

Lease self-help clause allowing landlord to enter, do repairs, and recover cost from tenant

Jervis v Harris advantage (no s146)

Landlord can recover repair costs without serving s146 and tenant cannot use counter-notice procedure

Repair costs as debt

Under Jervis v Harris clause, repair costs are recoverable as a debt in full rather than limited damages