Can I terminate the lease of my business premises? Commercial property partner Nick Arthur summarises the legal position.
If you are a business Tenant and worried about your financial position in this unprecedented crisis then you can call Nick for a free initial consultation on 01271 372128
In these uncertain times, many businesses will be worried about the prospect of having to pay rent for their commercial premises without being able to open for trade. Bars, cafes, restaurants, theatres, leisure facilities, hotels and other businesses are all dealing with a reduction, and in some circumstances a complete cessation of footfall.
This is leading to a large number of calls to our free legal helpline from business owners asking, ‘Can I terminate the lease of my business premises?’
Our answer to this question is will depend on the terms of your lease. Leases vary, so it is important to get an expert to read through yours and advise on what your options are.
These are just some of the provisions in a business lease that we generally have to consider when dealing with the question, Can I terminate the lease of my business premises?
Your business lease might contain a break clause which will give you the right to give notice to your Landlord. However these usually require a notice period of not less three months and usually six months. In some cases it will be subject to conditions.
Tenants do not have a legal right to simply surrender business premises and hand back the keys. A Landlord is not legally obliged to accept a surrender, and therefore even if you shut up shop and return the keys to the Landlord, your legal obligation to pay the rent and maintain the premises will continue.
The Landlord may agree to accept a surrender voluntarily, but they may be reluctant to do so as they will then be responsible for maintenance and paying the business rates. Landlords will also know that it will be more difficult than usual to find a new tenant to occupy the premises and may therefore be left with vacant premises for some time.
Some sectors may be experiencing a higher demand for their services at the moment and therefore need new premises urgently to meet that demand. So, if a new Tenant can be found then it may be possible to assign the lease to them. Most leases will not allow the Landlord to withhold consent to an assignment unreasonably and the outgoing Tenant will usually be obliged to guarantee the new Tenant under Authorised Guarantee Agreement.
Rent Free Period
The Landlord and the Tenant may agree to a rent-free period to cover the duration of the Coronavirus crisis. This would be on the basis that they will review the situation once the crisis has passed.
The Landlord is not obliged to agree to a rent cessation however. It will be important for the Tenant to explain their circumstances to the Landlord clearly and to keep them updated so the Landlord can take this into consideration.
Alternatively the Landlord and Tenant may be able to agree to delay payment of rent until the Coronavirus crisis passes or until the Tenant is able to access finance to cover the rent, such as the government backed loans announced by the Government.
It will be important to legally document any such agreement to ensure that any rent-free or delayed rent agreements are not left open ended.
How We Can Help
If you have been left wondering, ‘Can I terminate the lease of my business premises?’ then we are here to help. Nick Arthur is a specialist commercial solicitor at Slee Blackwell Solicitors who has years of experience of dealing with business leases throughout Devon. He can review your lease and advise you on your options in these challenging times.
Call 01271 372128 or email Nick direct at [email protected]