I am a landlord of a business premises and I granted a lease which excludes my tenant’s right to automatically renew the lease at the end of its term. My tenant has granted a sub-lease which does not exclude the right of automatic renewal and is in breach of the main lease. I want the sub-tenant to vacate the premises at the end of the term, what can I do?
The sub-tenant will be entitled to a renewal of that lease, even when the sub-lease was granted in breach of the main lease, provided the following conditions have been complied with:
- There is a tenancy in place.
- The tenancy is for the premises that are occupied by the tenant/sub-tenant.
- The tenant/sub-tenant occupies the premises for the purposes of its business.
Where this occurs, you have the following options to prevent the lease renewal:
If the sub-lease was granted in breach of the main lease, this may give you grounds to forfeit the main lease. Forfeiting the main lease will automatically bring the sub-lease to an end.
However, you should be aware that if the sub-lease was granted quite some time ago, you may have given up your right to forfeit the main lease by treating the lease as continuing without taking action. This will likely be the case if the breach was overlooked initially when the sub-lease was granted.
Oppose the grant of a new tenancy on one of the specified grounds:
The law sets out a number of grounds in which you can oppose your tenant’s right to a new lease.
One popular ground often used, entitles the landlord to oppose the grant of a new lease on the basis of either a substantial breach by the tenant or some other reason connected with the tenant’s use and management of the premises.
“Some other reason” would be, for example, where the tenant’s use is not in breach of the lease but is in breach of planning consent, which has led to the Local Authority serving an enforcement notice on the tenant.
However, the court still has discretion to grant a lease even when this ground is satisfied and therefore this ground is limited in nature.
Serve a “S.40 Notice”:
You can serve a S.40 Notice on your immediate tenant at any time during the last two years of the main lease, and request information about any sub-leases that may have been created. It will ensure you are made aware of any sub-lease granted that may have been in breach of the main lease. Again however, by the time the notice is served, you may have given up the right to forfeit the lease.
It is clear the above options are limited in nature. Nonetheless, if a lease is drafted adequately from the outset, it can limit your exposure to an inadvertent new lease at the end of the contractual term. Here at Linder Myers, we have the expertise and know-how when it comes to specialist lease drafting and we strive to ensure adequate protection for our client’s legal position in line with their objectives.Find out more about our Commercial Property department