In last month’s series of in house lawyers forums, Pamela Shepherd and Lisa McGinn cover break rights, alienation, surrender, term expiry and exit considerations.

1. I’m a tenant, get me out of here!
In house lawyers forum – March 2015

2. • break rights
• alienation: assignments & underlettings
• surrender
• term expiry
• exit considerations

3. • purpose: allows a lease to be
terminated before expiry of the
contractual term
• caution: conditions must be complied
with strictly – not good enough to be
‘almost there’

4. • be warned - landlords can (and do!) try
everything to argue that a tenant’s
break option has not been validly
exercised

5. Conditions
• ideally a break right should be
unconditional
• often, however, landlords insist on at
least one or two conditions, such as
– payment of rent
– material compliance
– vacant possession

6. Conditions continued
• payment of rent
– is a full quarter required?
– example: a lease contains a break option
with a break date of 25 March 2015,
conditional on payment of rent up to the
break date. Rent is payable quarterly. Is
the tenant obliged to pay the rent due
on the March quarter day?
– other sums, e.g. service charge,
insurance premium, interest?

7. Conditions continued
• material compliance
– be very wary of agreeing to this!
• vacant possession
– best practice - ensure all of the tenant’s
goods, belongings, etc. are cleared from
the premises on or before the break date

8. Assignment & underletting
• what does the lease allow?
– absolute bar
– partial bar (or ‘qualified covenant’)

9. Assignment & underletting
• consent - when is it unreasonably
withheld?
– refused
– delayed
– conditions

10. Assignment & underletting
• statutory duties
– principal duty is to give consent (within
a reasonable time)
– written notice (within a reasonable time)
– pass on an application to anyone whose
consent is also needed (e.g. superior
landlord, mortgagee)

11. Assignment & underletting
• pre-conditions - are they valid?
• common pre-conditions
– AGA
– assignee to provide acceptable surety
– no rent arrears
– any underletting must be at market rent
– any underletting must follow the same
format as the lease

12. Assignment & underletting
• landlord can impose additional
conditions

13. Assignment & underletting
• what if consent is refused?
– is it reasonable?
• what if consent is unreasonably
withheld?
– proceed anyway
– apply to court for a declaration
– claim damages

14. Assignment & underletting
• top tips for a successful application
– in writing & sent to correct person
– include all relevant information
– include references & last three years
accounts for proposed assignee / sub-
tenant

15. Assignment & underletting
• top tips for a successful application
– deal with any pre-conditions explaining
how they have been met
– detail any special requirements
– confirm you will pay landlord’s
reasonable costs

16. • consensual arrangement - neither party
can force the other to accept a
surrender
• effect - release tenant from any future
liability (note: historic liability remains)

17. • terms - no requirement to act
reasonably! Common landlord
requirements
– payment of a premium
– compensation
– replacement tenant

18. • tenant can walk away from the lease
• notice?
– advisable to give written notice, even if
not strictly required

19. • implications of the Landlord and Tenant
Act 1954
– lease will automatically continue if
tenant remains in occupation beyond
expiry of the contractual term
– 3 months notice (section 27)

20. • vacant possession
• check if there are any outstanding
liabilities, for example is there an
outstanding rent review? Avoid costly
surprises!

21. • an important consideration in deciding
whether to vacate is the cost
implications of that decision, which can
often be greater than initially
anticipated
• some things to think about
– dilapidations
– reinstatement
– relocation costs

22. • basis: a landlord is entitled to be
compensated for the tenant’s breaches
• close scrutiny of the lease is crucial –
what is the tenant responsible for?
• LTA 1927 section 18 - cap on value

23. • other considerations
– loss of rent claims
– what is the landlord’s intention for the
premises post lease expiry?

24. • often part of the claim for dilapidations
• what were the terms of any fit out
works carried out at the start of the
lease?
• speak to the landlord early on - can a
deal be done?

25. Get in touch if you have any questions or
would like further information.
t +(0)121 237 3937
e pamela.shepherd@brownejacobson.com