Property Lease

Know Your Property Rights?

A business tenant that wants to move premises (or just stop trading from them) may have several options to choose from, and should consider getting professional help when deciding which option is best and their negotiating strategy.

Break clauses

They may be able to use a break clause in their lease to end it. Break clauses let tenants get out of their lease at specified points during the lease, without any continuing liability to the landlord. Check your lease to see if there is a break clause, how much notice you have to give that you are exercising the break clause, and any conditions to be satisfied first.

Ending the lease

Alternatively, the tenant and landlord may be able to reach an agreement that the lease will end, even if it has not yet reached its full term. The tenant may be able to agree they will not have any ongoing liability to the landlord, but the landlord is likely to ask the tenant to pay a termination fee, cover their legal and other professional costs and, often, pay for repairs and redecoration.

Selling the lease to someone else

The tenant may be able to sell its lease to a new tenant – lawyers call this an ‘assignment’. The lease will invariably say the tenant can’t assign without the landlord’s consent – the landlord will want to check that the new tenant is good for the rent. So will the outgoing tenant, because the landlord will usually also say the outgoing tenant must agree to pay for any breaches of the lease by the new tenant in future, even though the outgoing tenant has left, or give a guarantee in respect of them – and to accept other liabilities, either on their own or shared with the new tenant. The outgoing tenant will need to negotiate with both their landlord and the new tenant – and they may need professional help finding and checking prospective tenants. Time spent, and costs, can quickly mount up if you’re not careful.

Sub-letting

If the lease allows it the tenant may be able to sub-let the premises to a sub-tenant, who moves in instead, and the existing tenant becomes the new tenant’s immediate landlord. The lease may say the landlord must consent before a tenant can sub-let.

If a tenant sub-lets, they are still liable to their landlord under their existing lease, so it’s important that the tenant ‘manages’ their sub-tenant so the sub-tenant doesn’t create problems for the tenant with its own landlord.

Negotiating any of the above will be easier if you take advice from someone who knows the local market, can advise on which options are best for you, and can negotiate to your advantage.

In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.

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