Ending a commercial property lease early

You can sometimes end a commercial lease earlier than the agreed date.

Before you do this, you may want to find a solicitor to get legal advice.

Break clause

A commercial property lease usually continues until its end date unless it includes a break clause.

A break clause is a line in the lease that allows the landlord, tenant or both to end a lease early without facing a penalty. It includes an agreed date when the lease can be ended.

To use a break clause, you must give the other party notice. The break clause will say how much.

You may need to meet other conditions, for example paying the rent by an agreed date.

Tenants: ending a lease early without using a break clause

If you’re not using a break clause, your landlord might agree that you can either:

  • end the lease early
  • pass the lease on to someone else

If these situations don’t apply you must continue to pay rent for the whole tenancy period.

Find a solicitor if you need legal advice.

Ending the lease early with landlord agreement

This is sometimes called ‘surrendering the lease’. You’ll need to have legal documents which prove that you and your landlord agreed to end the lease.

Passing the lease on to someone else

This is sometimes called ‘assignment of the lease’. Whether you can do this or not depends on the details of your lease.

You’ll need the landlord’s permission. They may ask you to provide a guarantee for the new leaseholder.

Subletting

Subletting is when you let all or part of the premises to another business who pays you rent. Whether you can do this or not depends on the details of your lease.

You’ll also need the landlord’s permission. If they allow you to sublet, the lease will continue.

You’ll be responsible for paying rent to the landlord, whether you’re trading from the premises or not. This still applies if the business you sublet to doesn’t pay you.

Landlords: ending a lease early without using a break clause

As a landlord, you can only end a lease early without a break clause when the tenant fails to pay rent or meet other lease obligations.

If you have included a ‘forfeiture clause’ in the lease, you can use it in these situations to end the lease. If the tenant challenges this in court, they may be allowed to stay in the property while the case is ongoing.

Fixed-term tenancy

A fixed-term tenancy means the lease automatically comes to an end when the term is up.

Staying on without a new lease

If you’re a tenant and you want to stay on after the fixed-term ends, you can do so if your landlord agrees.

You still must pay the rent and service charge and follow all the terms of the lease unless one of the following happens:

  • either you or the landlord serves a notice
  • the landlord accepts there’s been an ‘implied surrender’

An implied surrender is when the behaviour of landlord and tenant suggests the lease has ended, for example:

  • the tenant has given the landlord the keys
  • the landlord now occupies the property

Talk to a solicitor if you don’t know whether there’s been an implied surrender.

Giving notice

After a fixed-term tenancy has ended, the tenant must usually give 3 months notice if they want to end the lease. The landlord must usually give 6 months notice.

The lease will state the amount of notice each party must give.

Leases protected by the Landlord and Tenant Act 1954

If your lease is protected by the Landlord and Tenant Act 1954, the landlord must allow you to extend the lease unless any of the following are true:

  • you’ve failed to repair or maintain the property as set out in the lease
  • you’ve repeatedly failed to pay rent on time
  • you owe unpaid rent
  • the landlord can provide another suitable property for your business
  • you’re renting part of the property and the landlord wants to rent out the whole property
  • the landlord wants to demolish or redevelop the property
  • the landlord wants to live in the property or use it for business purposes
  • you’ve broken any other part of the lease agreement

A lease should state if it’s protected by the 1954 act. You can ask a solicitor if you’re not sure.

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