Lease termination Flashcards
How can a lease end?
- Effluxion of time – lease ends at the end of the contractual term. A protected tenant will be able to hold over after the end of term.
- A break clause – generally requires action by a party to end a lease
- Surrender – tenants give up leasehold interest to landlord.
- Notice to quit – for a periodic tenancy means either they landlord or tenants giving notice that they intend the tenancy to end. For a protected tenancy a landlord notices to quit will end the periodic tenancy but the TENANT CAN HOLD OVER
- Merger – means either the tenant acquires landlords’ interest or a third party gets both interests.
Effluxion?
- A fixed term tenancy which does not have security of tenure will expire at the end of the contractual term. Landlord can require tenant to leave, and tenant becomes trespasser.
- If landlord consents to an unprotected tenant remaining in occupation the tenant is not holding over, but treats as tenant at will.
- If landlord then accepts rent the tenancy at will may be converted to a periodic tenancy.
Break clause?
- Allows the lease to be ended before the end of the contractual term
- If tenant exercises it, its effective with a protected tenancy.
- BUT if landlord does it – only brings contractual term to an end. Tenant MAY still hold over.
Notice to quit?
- A periodic tenancy cannot be contracted out
- Unless there is a tenancy agreement – the notice period required depends on period of tenancy
- Landlord can serve it.
- Must end on either last day or first day of tenancy period.
- SECURITY OF TENURE
- If a periodic tenancy is a protected tenancy, then the landlord may still serve notice to quit but it only ends the period tenancy, tenant can still hold over.
- For a landlord wishing to recover possession, will NEED TO SERVE A HOSTILE section 25 notice.
Notice period
Weekly - residential 4 weeks other 1 week
Monthly - 1 month
Quarterly - 1 quarter
Yearly - 6 months
Surender?
- A fixed term tenancy may be brought to an end quicker if they agree. Tenant gives up its interest, an express surrender must be made by deed.
- Reverse premium is payment from tenant for ending.
- A surrender by operation of law occurs when landlord and tenant act in a way inconsistent with continuation of the tenancy.
Landlords remedies? Damages?
- A tenant covenants are enforceable as a matter of contract between the parties.
- Measure of damages is to put landlord back in position they would have been if not for breach.
- Difficult – SAME PROCEDURE AS FOREFITURE – NEED TO SERVE S146 NOTICE
- MAXIMUM YOU CAN RECOVER IS DROP IN VALUE OF LANDLORDS INTEREST NOT THE ACTUAL COST
Action in debt?
- Can issue court proceedings to recover a debt
- An action for debt is limited to rend due in the 6 years before issue of proceedings.
- Time consuming and costly
- If current tenant is an assignee, another possibility is to pursue former tenant.
Guarantor and rent deposit?
- If landlord had concerns about covenant strength may have obtained a guarantor or rent deposit.
- Landlord can rely on contractual terms to claim is losses from the guarantor.
- Will typically cover all tenants’ obligations so can recover unpaid rent and any breach of tenant’s covenants.
- Landlord can also draw on rent deposit if there are any arrears. Usually have to top it up afterwards.
CRAR?
Commercial rent arrears recovery (CRAR) – recover the ACTUAL RENT + VAT + INTEREST – not service charge or insurance
- Self-help remedy – generally cheaper and quicker
- Can be used when:
- Premises are purely commercial
- A minimum of seven days principal rent is owed
- 7 clear days notice
- Lease has not been forfeited
CRAR requirements
- Landlord must appoint an enforcement agent who has required certification
- Seven clear days’ notice must be given of intention to enter the tenant’s premises
- Notice must include certain details such as amount of debt and how to repay it, details of the power being used to enforce the debt and details for enforcement agent.
- If notice expires without repayment the enforcement agent can enter the premise and take control of goods belonging to the tenant
- Landlord must serve a further seven clear days’ notice if it intends to sell any of the seized goods.
Forfeiture?
Forfeiture is the landlords right to re-enter premises and take them back from the tenant. Brings lease to an end before the contractual term because of tenant breaches.
- Threat of forfeiture may spur a tenant into compliance with its obligations.
- Obviously, weakness is that lose tenant.
- Problem is – when dealing with repair – the rights granted by 1938 act – which means the process becomes long and arduous
- Breach of repair – need s146 notice + 1938
- Non-payment of rent – nothing – within the forfeiture clause
Right to forfeiture?
- Not an automatic right only permitted insofar as lease has it
- Commercial lease will typically allow the landlord to forfeit the lease if the tenant fails to pay rent.
- For non-payment of rent, landlord is entitled as soon as the lease allows
Otherwise, the landlord must serve a section 146 notice. 3 requirements
1. These details the alleged – specify breach and
2. gives tenant a reasonable opportunity to reedy
3. demand compensation.
WHERE lease the 1938 doesn’t apply tenant cannot serve counter notice
1938 Act – leasehold repairs – ONLY APPLIES TO
1. Breach of repair –
2. Granted for 7 years originally and more than 3 years remaining
Then have to give details of tenants’ rights – of serving counter notice within 28 days. IF tenant does serve it – then landlord can only continue with leave of court and court only give leave of court in some
Waiver of forfeiture?
RE-ENTRY IS HOW YOU ENACT FOREFITURE – TO TERMINATE THE LEASE
ENTRY – JUST MEANS GOING IN
Why can forfeiture be an effective remedy
- Typically causes embarrassment
Waiver of the right to forfeiture
- If landlord acts in a way acknowledging the continuing existence of the lease, landlord loses right.
- An implied waiver of right to forfeiture is:
- Landlord does some unequivocal act recognising the continuing lease
- With knowledge of breach in question and
- Communicates that act to the tenant
Types of breach?
a breach is a once and for all breach – landlord waives the right of forfeiture. It will never be able to regain it for that breach.
- Non-payment of rent
- An unlawful assignment or underletting
- An insolvency events
Other breaches are continuing breaches – the day that the breach continues the landlord regains the right of forfeiture
- Failure to keep premises in repair
- Breach of user covenant
Relief from forfeiture
- As soon as a landlord serves s146 – tenants is entitled to apply for relief from forfeiture
- IT’S A DISCRETIONARY remedy. If granted than lease is restored.
Breach of repair covenant?
Almost all tenants are in some way breaching of their repairing obligation.
The law therefore is more generous to tenants than in other breaches.
Forfeiture for breach of repairing obligation
- Landlord must serve a s146 notice
- Leasehold property act 1938 applies to leases that meet the following
- Lease is for a term of seven years or more
- There are at least 3 years of the term left to run
If so – tenant has 28 days to serve a counter notice. This means landlord must get leave form court to continue – THIS IS HARD.
Damages for breach of repairing covenant?
Damages for breach of repairing obligation
- Cannot issue proceedings for damages unless serves s146 notice. And given tenant 28 days to serve a counter notice.
- Further difficulty is the measure of damages is the loss of value to the landlord reversion not the cost of putting the premises into full repair.
Specific performance is another possibility – but not common
