Landlords - if your tenant wants to leave, you need to know your rights...

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Dan Evans, Cozens-Hardy LLP

As it has been well publicised in the press, times are tough. Well-established operators are taking the decision to close shops, leaving landlords in potentially tricky positions. In Norwich, high profile operators such as Toys R Us and Jamie’s Italian have taken decisions to close their doors.  With some tenants looking to leave, landlords need to know their rights.

If a tenant wants to vacate their property during their lease term, then this is normally done in one of three ways.  

  • Insolvency. This is a big topic and one that I am able to advise on, but so much will depend on the specific details of any case. Unfortunately, the reality is that if a tenant has entered insolvency proceedings there is little a landlord can do.
  • Break Clauses. Break Clauses are common in modern commercial leases and enable a tenant to terminate their lease early.  Notice requirements in Break Clauses are important and missing a deadline by even a day can render a Break notice unenforceable. Most Break Clauses are conditional; if these conditions are fulfilled then the tenant may vacate. Note that any ‘pre-break liabilities’ remain and a landlord will still have the right to pursue the tenant for these. The most common conditions are:
    • The tenant having complied with the terms of the lease (such as repairing covenants) 
    • Not less than 6 months’ notice must be given
    • Tenant must be up to date with their rent. 
  • Assignment. Most leases contain the right for a tenant to assign (transfer) their lease to a new tenant, but in most cases the landlord’s consent is needed.  A landlord must act reasonably in considering a consent application, which involves carrying out due diligence on the proposed new tenant to make sure that they are of a financial position to comply with the terms of the lease. Leases often contain rights for a landlord to request rent deposits or further guarantees as a condition of the landlord’s consent to assign, albeit there are obligations on the landlords to behave reasonably in considering an application - and reasons must be given if consent is to be withheld.  

As re-letting property has become harder in recent months, it is important that a landlord knows their rights and takes appropriate action.  

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