Navigating Commercial Lease Agreements

Introduction

In a lease, the user or the lessee is contractually obligated to pay back the owner or the lessor for the use of an asset. Assets such as land, homes, and vehicles can all be found in rental properties. Landlords can also use the lease to acquire industrial or commercial goods. Paperwork for a modern lease typically includes a selection of company lease templates and supporting documents. Lease options are available for various commercial assets, including workplaces, retail, shopping malls, and manufacturing sectors.

Main body

In the case, “Let to Status Palmer Ltd” the proprietor has the right to kick out the tenant. The Landlord and Tenant Act of 1954 (LTA) protects commercial tenants like Status Palmer Ltd. All the units on the site are governed by the LTA, which has authority over the property. In the process of allowing renters to remain on the property after the lease has expired, Part II of LTA was enacted. Sections 24-28 of the LTA provide business tenants with tenure security, allowing them to approach the court for a new lease on similar conditions after the term. If Status Palmer Ltd.’s tenancy is terminated under the LTA, it should be allowed to continue beyond the contractual termination date. The lease, in this case, expired in December 2018 due to the passage of time. The tenant must pay interim rent between the expiration of the contract and the renewal date, which is ideal (Cunliffe v Goodman [1950]). Now, the landlord can refuse to renew the tenancy because of redevelopment, a breach of the repairing covenant, and nonpayment of rent. The landlord must use section 25 Form to explain why a new tenancy is being refused.

Section 25 of the LTA permits negotiations between the parties once the landlord has served the tenant with an opposing notice. The parties may agree to compensate the renter in exchange for the tenant’s agreement to evacuate the premises if the landlord agrees. Negotiations, on the other hand, may not be fruitful. In this scenario, the landlord should take the matter to court and present evidence to support a claim that he or she should not renew the lease. The landlord’s main objection to a lease extension is the possibility of redevelopment in the area. Section 30(1) (f) of the LTA mandates that the landlord must show that it plans to demolish and rebuild the premises and that it cannot do so without taking control of Unit 1 first.’ This means that the landlord must demonstrate that it has a clear plan to rebuild Status Palmer Ltd’s space. As the UK Supreme Court explained in S Franses Ltd v Cavendish Hotel (London) Ltd [2017] EWHC 1670 (QB), it is more concerned with the landlord’s intention than with section 30(1)(f) motives for redevelopment.

As a result, the landlord can demonstrate that it has sought planning permission and is entering the property management industry. As a further measure of intent, the landlord should provide documentation of the anticipated work, including comprehensive blueprints, proposed building contracts, applicable authorizations, and proof of finance. The landlord might use redevelopment, intractable arrears, a breach of repairing covenants, and other violations as grounds for eviction. Section 30(1) (a), (b), (c), and (d) give the court the option of determining if a breach occurred if the landlord decides to proceed on these grounds. There is no guarantee that a tenant will be compensated if they break the terms of their lease. On the other hand, the redevelopment ground offers the possibility of compensation if the court decides it is warranted. It’s possible that going this path will make the landlord legally responsible for compensating the tenant for moving out of the property.

In the case of Billy Skynard Plc, the question is whether the landlord has the right to evict the tenant and take control of the property. For the past fifteen years, a tenant, Billy Skynard Plc, has operated its business from this location. On the other hand, the tenant is adamant about not having their business relocated. Ownership of Unit 2 can only be obtained using the LTA (Cunliffe v Goodman [1950]). The assumption is that the lease has not expired because the renter has remained on the premises for 15 years. As a result, the landlord intends to terminate the lease early and reclaim the property during the tenancy. The landlord can end the tenancy with a section 25 notice if the lease was for a set duration and has not yet expired. If the landlord has a “break provision” in the lease, he or she can cancel the contract early.

The proprietor will serve the tenant with a Section 25 notice between six and twelve months before the end of the contractual term for the first choice. In any case, a proprietor cannot give a section 25 notice to a tenant who has previously given him a formal notice of intent to renew their lease in writing. When a tenant refuses to move but does not provide the proprietor with a formal notice of renewal, it is presumed that the tenant has refused to move. Counter-notices are sent to property owners using section 25 notice templates if the tenant does not want to relocate. An agreement between the two sides is possible. If the parties cannot reach an agreement, the property owner should seek a court order allowing it to take ownership of Unit 2. Renters who want a new lease can submit a counter application. Several factors go into a court’s final ruling, including the evidence and arguments put forth by both parties. More crucial still, the property owner, has recourse to section 30(1) LTA if the tenant counter-applies for a fresh lease renewal.

An investor or landowner can claim that the property will be demolished and rebuilt solely for their use before they claim it and evict the renter (Capocci v Gobble [1987]). To go this way, however, the tenant must commit several severe lease violations, including nonpayment of rent and blatant contempt for other terms of the agreement. If the second option is included in the contract, the investor or proprietor may invoke the ‘break clause.’ A break clause allows the tenant or landlord to terminate the tenancy by the provision during the contract term. It allows tenants and landlords to end a lease early for whatever reason they see fit. In this case, the landlord can send a written notice to the tenant to execute the break provision in this situation. Break clauses, on the other hand, only apply to commercial leases that do not include the LTA’s guarantee of security of tenure. Execution of a surrender deed is another option (Capocci v Gobble [1987]). The above option is doubtful because the tenant has refused to shift, and it may be difficult to persuade it to compromise. In convincing them to sign a deed of surrender, a financial inducement or reward may be necessary.

In Charlie Charles Plc, the question is whether the landlord has the right to evict the tenant and take control of the property. Charlie Charles Plc has been conducting business on the premises for the past five years. When the epidemic hit, they had to lock their doors, but they worked out a deal with their proprietor to cover some of the rent. One of the most important covenants in a lease agreement is the obligation to repair the property. The property needs repair due to its poor condition. If the property is in a condition of deterioration, Charlie Charles Plc will violate the lease’s commitment to repair. As soon as the liable party notices damage, they must fix it. Repairs such as total renovation or reconstruction of the property are not required under the court’s ruling in Eyre V. McCracken [2000] EWCA Civ 501. As stated in Proudfoot v Hart [1890], 25 QBD 42, the appropriate level of repair should be based on the building’s age, character, and location.

If the tenancy continues, the landlord can give notice. A promise to repair must be broken for termination. Section146 of the LPA compels landlords to remind tenants of their responsibilities before serving a legal notice. The landlord shouldn’t issue a warning since the tenant may see it as a sign of continued cooperation. If desired, the landlord can end the lease early. When an event qualifies, the landlord takes possession. Poor repair is the qualifying event. The right is established when a lease includes a forfeiture clause (Barth v Pritchard [1990]). If a forfeiture clause was in Charlie Charles Plcha’s lease, the landlord might cancel it as soon as he realized the tenant had broken his agreements. If the landlord takes half of the rent, he can still evict because the criterion is not nonpayment of rent but a commitment to restore the property.

Another viable approach is using the break clause if it was incorporated in the lease. The landlord needs to pay attention to the precise language of the relevant clause. Therefore, the notice to break was invalid, and the tenancy was not terminated. As a result of the preceding, the landlord must give Charlie Charles Plc a break notice in conformity with the break clause to be legal. Apart from that, the landowner may also terminate under LTA sections 24(1a) and 25. This strategy will work well if the renter does not object to the termination or ask for a renewal. The tenant’s lease surrender would also suffice with the landlord’s consent. There may be grounds for denial of a new lease on redevelopment or breach of the obligation to repair in the event of a failure in the landlord’s proposed termination. This is after the landlord has served a six-month and no longer than 12-month notice of termination.

Conclusion

The 1954 Act attempts to strike a fair balance between the needs of landlords and tenants. The client must assess the tenant’s flaws and balance up whether to pay compensation against the possibility that the courts may allow the tenant to give a remedy to the issue to gain possession of the units. To prevent a tenant from requesting a new lease in accordance with the 1954 Act, the landlord must meet a 1954 Act reason of disagreement if the landlord intends to challenge the tenant’s s.25 notice. If the court is convinced that the client has established any of the grounds indicated in his notice, the application must be dismissed. Taking back a unit from a renter without paying compensation is possible if the client can show that the tenant breached their responsibilities. Grounds (f) and (g) may be viewed as commercial realities by the client, who may then pay compensation to be certain of regaining possession. There may be violations, but a landlord might not want to take a commercial risk by going to court.

Bibliography

Barth v Pritchard [1990] 20 E.G. 65 [Online] Web.

Capocci v Gobble [1987] 2 EGLR 102 [Online] Web.

Coppin v Bruce-Smith [1998] 3 WLUK 553 [Online] Web.

Cunliffe v Goodman [1950]1 All ER 720 [Online] Web.