In any difficult financial climate, tenants may look for ways to reduce their financial burden by moving to smaller premises or closing up shop completely.
While tenants may be considering entering into concessionary arrangements with their landlords, they will also want to consider whether they have the right to bring their current tenancies/leases to an end or whether they can only do so through negotiations with the landlord.
Can You End Your Agreement?
You may be occupying your business premises in a number of different ways. Whether you can end your agreement will depend on the nature and terms of the agreement (and not necessarily what it is called). For example:
If you occupy property as a tenant-at-will, you can usually bring the agreement to an end immediately by notifying the landlord;
If you occupy under a licence, you may be able to give notice to the landlord, or 'reasonable notice', to bring the agreement to an end;
If you occupy under a periodic tenancy, you will be able to give notice to bring the tenancy to an end. Periodic tenancies can only be brought to an end on certain dates, and the notice periods can vary from one week to up to 18 months;
If you are holding over under a business tenancy, you may be able to serve formal notice under the Landlord and Tenant Act 1954, to bring your tenancy to an end or just leave if the fixed term of your business tenancy will soon expire;
If you occupy under a lease or a licence with a fixed term, you may have the option of exercising a break clause to bring the agreement to an end. Break clauses are usually very specific about the method and timing of break notices and the conditions to be met by the tenant. Care is required to ensure any break option is exercised correctly and the conditions strictly met.
Factors to Consider
If you are able to bring your agreement to an end, you will need to consider the logistics of meeting any notice or break conditions (which will be construed strictly), and the logistics of fulfilling your obligations at the end of the agreements. For example:
Are you able to serve notices in accordance with the terms of the agreement? For instance, if the agreement requires you to deliver a notice in person, can this be achieved?
Are you able to vacate the property and remove all stock and rubbish? Will removals companies be available?
Are you able to carry out any repairs needed? Will surveyors and contractors be available?
Do you have facilities to make any payments that you are required to make?
An inability to comply with notice or break conditions may make it impossible to end the agreement. An inability to comply with yielding-up obligations may expose you to a claim by the landlord for dilapidations. If you cannot vacate the property at all after having served notice, you may be liable to pay penalty rents to your landlord.
What Other Options Are Available?
If you are not able to end your agreement, you may want to consider some other options. For example:
Are you able to assign the agreement or sublet to someone else? Might, for example, a food retailer, want to take a short term sublease in order to service deliveries?
Will your landlord accept a surrender of the agreement? Many landlords will not in these circumstances, but some might, such as a landlord with redevelopment plans.
Can you reach a concession agreement with your landlord? Although you may not be able to bring your agreement to an end, you might be able to reduce your liabilities for rent.
Check whether you have insurance to cover any losses that you suffer during this time.
Consider whether new legislation has frustrated your lease or allows you to rely on a force majeure clause, which may have brought your agreement to an end automatically.
The current situation means that tenants must, more than ever, properly consider their position when looking to take steps to bring their arrangements with landlords to an end. In all cases, it will be important to consider all of the options and the practicalities of implementing them at this difficult time.