Terminating a commercial lease

Getting ready to leave? We explain what should be done when preparing to leave a property once a commercial lease ends. When a lease is nearing the end of its contractual term or a break clause is being exercised, the lease should be read and construed as a whole, particularly where clauses are interlinked e.g. alterations and yielding up.

A recent dilapidations case involved the yielding up of the premises by the tenant where carpet tiles had been replaced in strips rather than tiles. The tenant served a break notice but the landlord did not reply (there is no obligation for the landlord to do so).

After the lease had ended, the parties were unable to agree a figure for the dilapidations liability. Following a court hearing it was held that the re-carpeting works had not been carried out in accordance with the lease terms. On appeal, the tenant argued that the carpet tiles were a tenant’s fixture and the court agreed – carpet tiles were a fixture and the alteration was a permitted alteration. The new carpet was not out of repair at the end of the lease and any works would be carried out by the landlord once a replacement tenant had been found. The tenant should not need to finance any void period of the premises once compensation had been paid for the tenant’s breaches of covenant.

Some leases e.g. new or re-furbished premises have a specification attached. Clear wording in such a lease makes it easier to give advice and ensures that each party are clear about their obligations.

What does this mean?

If the parties had followed best practice on terminal dilapidations, discussions about the carpet would have taken place long before lease expiry. More importantly, a party who refuses to engage in the form of dilapidations protocol is running the risk of being penalised on costs. 

More information

Contact our Commercial Property Department for further information on our services. Contact 01708 229444 or mail@pinneytalfourd.co.uk to speak to a member of the team at any of our offices in Brentwood, Hornchurch and Upminster. We are also able to see clients in Leigh on Sea.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at August 2016.