Lease termination Flashcards
What are the 5 methods of lease termination?
- Effluxion of time
- Break clause
- Notice to quit (periodic tenancy)
- Surrender
- Merger
What happens at the end of the effluxion of time (end of contractual time) for a protected and unprotected tenant?
- Protected = have the right to hold over
- Unprotected = if they do not vacate, landlord can treat them as a trespasser
What happens if a landlord 1) consents to a tenant remaining in occupation and 2) accepts rent from tenant?
- Treated as a ‘tenant at will’ (not holding over)
- Tenancy may be converted to periodic tenancy
What happens when a landlord exercises a break clause for a protected tenancy?
It brings the contractual term but the tenancy can still hold over
Whether it is a landlord-only or mutual clause
If protected tenant exercises = break is effective
How can a landlord’s break clause definitely be effective?
Contract out (of security of tenure)
How does a periodic tenancy end?
Either landlord or tenant will give notice that they intend tenancy to end
What is the notice period for each type of periodic tenancy?
- Weekly = 4 weeks (residential) or 1 week (other)
- Monthly = 1 month
- Quarterly = 1 quarter
- Yearly = 6 months
What date does the notice give and when must it be?
A date on which to vacate on the first or last day of tenancy period
E.g. if tenancy runs from 15th of each month to 14th next month = notice period may end on either 14th or 15th
How do you contract out of a periodic tenancy?
You can’t!
NB not every periodic tenancy will qualify as a protected tenancy
What happens if a landlord serves notice to quit on a protected periodic tenancy?
The periodic tenancy itself ends but tenant can still hold over
Landlord would need to serve s25 notice
How can a s25 notice double as a notice to quit?
If it date of termination ends on first/last day of period
But separate notices can be served
What can a tenant of a protected periodic tenancy not do when it holds over?
Serve a s26 notice
What is a surrender?
Tenant gives up leasehold interest with landlord’s agreement before the end of the contractual tem
How is an express surrender made?
By deed
What may be payable on surrender and who pays it?
A premium - paid by who has most to gain
What is a reverse premium?
Paid by tenant to give up its interest
When does a surrender by operation of law happen?
When landlord and tenant act in a way inconsistent with continuation of the tenancy e.g. landlord accepts keys from tenant with an understanding that tenant leaving the premises permanently
Is express surrender by deed or operation of law necessary for a protected tenancy?
Either is effective
What is a merger?
The freehold and leasehold are merged together and come to an end (whether tenancy protected or not)
Tenant acquires landlord’s interest (opposite of surrender) or third party acquires both
What are the 5 different remedies of a landlord?
Not including forfeiture!
- Damages
- Action in debt
- Guarantor and rent deposit
- Commercial Rent Arrears Recovery (CRAR)
- Equitable remedies
Strategic area of law; choice of landlord depends on several factors
Why are tenant’s covenants enforceable?
Enforceable as a matter of contract between the parties - can claim damages
NB specific rules regarding some breaches
What is the measure of damages?
Put landlord back into position they would have been if not for breach
Why would a landlord not choose damages as a remedy?
Court proceedings are costly and protracted
What is an action in debt and what is it limited to?
Issuing court proceedings to recover a debt - limited to rent due in 6 years before issue of proceedings
Rent preceding 6 years is irrecoverable
Relevant for long leases where ground rents can often go unpaid
Although court claims are costly and time consuming, why would an action in debt help preserve landlord/tenant relationship?
Time taken to pursue debt gives the tenant breathing space
If the current tenant is an assignee, when can the landlord pursue the former tenant?
If it is an old lease or former tenant gave authorised guarantee agreement
When can a landlord use the guarantor and rent deposit?
- Guarantor - to claim losses from all of tenant’s obligations (not limited to unpaid rent)
- Rent deposit - if there are arrears (usually limited)
Useful cushion for relationship if breach is isolated occurrence
What must a tenant do if a landlord withdraws from the rent deposit?
Top it up
What happens in a CRAR (commercial rent arrears recovery)?
An enforcement agent can enter the premises, take control of the tenant’s goods, and sell them to reach the value of debt owed
Is the court involved in CRAR?
No
When can CRAR be used?
- Premises is purely commercial (i.e. cannot be used for a shop with a residential flat above it)
- Minimum of 7 days’ principal rent owed
- Lease has not been forfeited
C - purely commercial
R - Ronaldo 7, 7 days principal rent owed
AR - annual rent + VAT and interest
What rent can CRAR be used to recover? What rent can it not be used to recover?
- Can recover: annual rent, VAT and interest
- Cannot recover: service charge or insurance
Who must landlord appoint to conduct CRAR?
Enforcement agent (EA) who has required certificate from court/exempt from requirement (e.g. police officer)
How many days notice given to tenant for CRAR and what must notice contain?
- 7 days’ clear notice of intention to enter premises (exc Sundays, bank hol)
- Notice to include details (amount of debt, how to repay, contact details for EA)
When can the EA enter the premises and take control of tenant’s goods up to value of debt owed?
When the notice expires without repayment of debt
When
What must the landlord do before it can sell seized goods?
Serve a further 7 clear days’ notice
What equitable remedies are available to the landlord?
- Specific performance (exceptional cases)
- Injunction (e.g. tenant intends to assign lease unlawfully, change use without permission)
Both quite hard to obtain!
When can an injunction for the unlawful assignment of a lease not be obtained?
If the assignment has already taken place
What is forfeiture?
AKA re-entry
The right of the landlord to re-enter premises and take them back from tenant which brings lease to an end before contractual term/any time during holding over
Merely the threat of forfeiture can be effective!
Is forfeiture an automatic right by law?
No - no express right to forfeiture, only permitted insofar as lease provides for it
E.g. tenant fails to pay rent, breach obligations under lease, insolvency event
Must have foreseen the right to put forfeiture in the contrat because it will not be implied!
What is the difference between forfeiture for non-payment of rent and for any other breach (e.g. repair)?
- For non-payment of rent - can forfeit as soon as lease allows
- For other breach of obligations - landlord must serve s146 notice
What must the s146 notice contain?
- The alleged breach
- A reasonable opportunity to remedy it
When can a landlord forfeit the lease after a s146 notice?
If tenant fails to remedy the breach specified
Why can forfeiture be an effective remedy?
- Embarrassment to business (change locks, put notice on door)
- Staff, customer and trades people cannot enter premises
What are the 2 ways of carrying out forfeiture and why would each be used?
- Peaceable re-entry of bailiff/landlord - quicker
- Apply to court for order to forfeiture - harder for tenant to challenge
What is the risk of peaceable re-entry?
Tenant challenges lawfulness of it or if stock/equipment is damaged/stolen/lost
How does a landlord risk waiving the right of forfeiture?
By acting in a way that acknowledges the continuing existence of the lease
When will an implied waiver of the right of forfeiture arise?
With knowledge of the breach in question, the landlord does an equivocal act recognising the continuing existence of lease and communicates act to the tenant
Intention of landlord irrelevant
A tenant has unlawfully assigned the lease to a new tenant. The lease would allow for forfeiture in that instance. The landlord knows that the assignment has gone through but accepts rent from the new tenant = landlord has waived the right of forfeiture against the new tenant.
What are the 2 different types of breaches?
- Once and for all breach - once landlord waives right of forfeiture it will never be able to regain it for that breach (non-payment of rent, unlawful alienation, insolvency event)
- Continuing breaches - each day breach continues, landlord regains right of forfeiture (failure to keep premises in repair, breach of user covenant, failure to comply with insurance obligation)
Tenant has let the premises fall into disrepair. The landlord may, for example, accept rent from the tenant. As it is a continuing breach, each day that the tenant fails to repair the premises, the landlord has a new right of forfeiture.
When can a tenant apply for relief from forfeiture?
As soon as landlord serves s146 notice/starts process of forfeiture
I.e. whether by peaceable re-entry or starting proceedings
What happens if a court awards tenant relief from forfeiture?
I.e. is a discretionary remedy
Lease is restored as if forfeiture never took place; restores parties to position they would have been in
How does a tenant get relief from forfeiture if it is for non-payment of rent?
Settling all rent arrears and landlord’s costs
Who else can seek relief from forfeiture?
Other parties that derive an interest from tenant’s lease
If an undertenant seeks relief from forfeiture, what could happen?
The undertenant becomes a direct tenant of the landlord on the terms of the sublease
How is forfeiture used for breach of repairing obligation?
Landlord must serve s146 notice of intention to forfeit (as w other breaches bar rent) detailing the remedy and giving tenant reasonable time to remedy the breach
Law more generous re breach of repair as it is a common issue that can be put right easier than others
In the case of a breach of repair obligation, when can a tenant serve a counter-notice and how long do they have to do this?
Leasehold Property Repairs Act 1938
Has 28 days to serve a counter-notice if:
- Lease is for term of 7 years or more; and
- At least 3 years of term left to run
NOTE THIS IS EXCLUSIVE FOR BREACH OF REPAIR
What does a counter-notice mean for the landlord?
They must get leave from the court before proceeding
Difficult!
May be able to get in exceptional circumstances e.g. repair needed urgently
When can a landlord issue proceedings for damages for a repairing obligation?
Not until it has served a s146 notice and given tenant 28 days to serve counter-notice
What is the measure of damages a landlord will receive for a breach of repair?
The loss of value to the landlord’s reversion
NOT cost of putting premises into full repair
A landlord’s inspection of premises reveals damage to the internal walls of the premises that the tenant has neglected to repair.
The repairs would cost £8,000, but the landlord’s freehold is estimated to be only £1,000 less valuable, if at all.
The landlord’s damages would be limited to £1,000.
Would specific performance ever be granted for repair breaches?
Rarely except for in exceptional circumstances like when lease contains no remedy for repairing breaches
If a commercial lease contains a self-help (Jervis v Harris) clause, what is the landlord entitled to do?
- Enter the property
- Carry out any repairs
- Recover the cost of doing so from the tenant
Does a landlord need to serve a s146 notice for a Jervis v Harris clause?
No
Why is a Jervis v Harris clause better financially than damages?
The cost of repairs is treated as a debt, not damages, so can be recovered in full
Cf damages which is loss of value to reversion
In the previous example given, the landlord would be able to enter the premises and carry out the repairs to the walls required. It would be able to recover the cost of £8,000 from the tenant, instead of the £1,000 damages it would have received through the courts.
