Due to the changing economic environment many business tenants have found themselves wanting to terminate their unprofitable commercial lease. Terminating a commercial lease does not have to be a legal drama. If you consider the following top tips and seek legal advice, then terminating your lease should be relatively pain free.
Tip - 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 - 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 the terms in your lease say 'including' or 'commencing on' this means that your lease will end 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 - 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 - When a tenant terminates, the notice does not have to be served on the 'competent' landlord. The competent landlord is defined as the original landlord, not as the tenant whom has sublet the property out. A tenant is able to serve a termination notice on the immediate landlord.
Tip - 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 - 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 - Upon termination of the lease, your landlord will look around the property examining for any 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.
Prior to serving notice on your landlord, seek the advice of specialist commercial property solicitor, they will be able to answer any queries or doubts you may have. If you fail to correctly terminate your lease, you may find that you inadvertently end up with an expensive and unwanted lease extension.