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Early Termination of a Lease

RedfernServices Property

The usual ways in which a lease can come to an early end are by the exercise of a break option (assuming such a provision exists in the lease), forfeiture, surrender and disclaimer.

If a break option is to be exercised, close attention must be taken to comply with the notice provisions and any pre-conditions in the Lease.  Failure to do so may make the exercise invalid and the lease could continue for its full term.

If the tenant runs up arrears of rent and/or commits other breaches, the landlord may seek to forfeit the lease. The landlord will be reluctant to do this if it considers it will not easily find a replacement tenant. The landlord might on the other hand, look to the rent deposit for the sums that are outstanding.

A disclaimer is where the tenant enters into liquidation or is declared bankrupt and its liquidator or trustee in bankruptcy of the tenant is able to exercise a power to disclaim the lease.

Alternatively, the tenant could enter into surrender discussions with the landlord.  However, because of the state of the market, the landlord might not be interested in voluntarily taking the premises back, in which case it is likely to seek (at the very least) a substantial premium from the tenant by way of compensation.

One other option would be for the tenant to try to assign the lease or to underlet the premises.  The landlord’s consent will likely be required for either transaction.

Please contact us for further information.