June 2009

Expired commercial leases, monthly tenancies & statutory tenancies

Problems can often arise when tenants (with commercial leases) allow an existing lease to expire without having exercised any available renewal of lease before the expiry date. It can get even worse if only loose arrangements are made with the Landlord thereafter.

In a recent case, the High Court was required to determine what notice period the landlord should have given to the tenant before evicting him from the commercial premises. In this case, the tenant took an assignment of an existing lease with the term expiring in September 2003 (but providing two rights of renewal). The business did not prosper.

In September 2003 the landlord met with the tenant and it was evident that the tenant would not be renewing the lease, but would continue to pay the rent and outgoings while he tried to sell the business. The term of the lease then expired and, in accordance with the lease, it converted to a monthly tenancy terminable by one month’s written notice by either party.

The business closed its doors in December 2003. The tenant continued to pay the rent and outgoings, but did not start advertising the business for sale until February 2004.

In November 2004 another meeting was held between the landlord and tenant. The landlord made clear his anger and impatience at the prolonged delays but provided the tenant further reasonable opportunity to find a buyer for the business provided the tenant made serious and prompt attempts to do so. When no new tenant was forthcoming, in February 2005 the landlord’s solicitor provided the tenant with one month’s notice to quit.

The tenant brought proceedings claiming breach of contract to afford him a reasonable time to find a purchaser for the business, and breach of the obligation implicit in that contractual commitment that he be given a reasonable period of notice of termination of the period in which he could find a new tenant.

The High Court upheld the District Court’s finding in favour of the landlord in determining that the tenancy could be terminated by the landlord by one month’s written notice. The Judge rejected the tenant’s claim that there was an obligation on the landlord to serve a notice some time before the expiry of “reasonable time” to warn when it would come to an end.

If you are ever unsure of your rights or obligations under a lease (either as landlord or tenant), you should contact us for advice.

Checking the documents As with so many areas of the law, with commercial leases it is essential to check the documentation. Ask: “is there agreement as to what is to happen upon expiry of the term of the lease?” If so, then that agreement will prevail. If not, then it will depend upon the date on the lease- If the lease came into operation before the 1st January 2008 then “ a tenancy [is] determinable at the will of either of the parties by one month’s notice in writing”; If the lease came into operation on or after the 1st January 2008 then it is a statutory tenancy under section 210 Property Law Act 2007 which may be terminated by either party by “giving no less than 20 working days written notice”. In addition to the above, the timing in giving such written notice becomes crucial to ensure compliance with the varying legal provisions.