Notice to quit

There is often uncertainty over the date on which a lease term actually ends, or the date on which a break clause is effective.

Where a term is expressed to run from a specified date, for example 10 years from 29 September 1999, the term starts at midnight between 29 and 30 September 1999 and ends at midnight at the end of 29 September 2009. But this rule is easily displaced.

Where rent is payable quarterly in advance, courts tend to conclude that the first rent payment is due on the first day of the term (so it includes 29 September 1999), and the term ends at midnight on the day before the rent payment date, ie 28 September 2009. Any other conclusion would involve complicated apportionments of rent. The best practice is to state the first day of the term (‘from and including 29 September 1999’) and the day the lease expires.

Giving notice

Business tenants are often surprised that they cannot always vacate at the end of a fixed term lease under the Landlord and Tenant Act 1954 and rely on the lease to end automatically.

Under the act, a business tenancy ends when the landlord or tenant gives notice. If the landlord has not given notice and the tenant continues its business from the property, the tenant must give three months’ notice of quitting before the end of the contractual term. If the tenant stays after the term ends, the lease will continue and the tenant must give three months’ notice expiring on a quarter day before the tenancy will come to an end.

On the other hand, when the tenant has vacated the premises before the end of the term, the case of Esselte AB vs Pearl Assurance shows no notice is required from the tenant.

In Esselte, the tenant had ceased to occupy the premises for business purposes before the expiry date of the lease and served notice under section 27(2) of the act. The Court of Appeal decided that, as the tenant had ceased occupation for business purposes before the end of the term, the tenancy came to an end at the end of the contractual term rather than the expiry of notice. It is unclear how long before the relevant date the tenant needs to have stopped using the premises for business. It is safest to ensure the landlord is notified in advance and that the keys are returned once the premises are vacated.

Failure to vacate

Tenants intending to vacate at the end of the lease can come unstuck if they are not be able to vacate in time. There are a number of options available. The tenant could serve a notice requesting a new tenancy, so preserving the right to remain. It will then be able to end the tenancy with three months’ notice after the term date. There is no need for notice to expire on a quarter day. However, this may be longer than the tenant needs. If the tenant serves no notice at all, the tenancy will continue. The tenant will then only be able to terminate the tenancy with three months’ notice expiring on a quarter day.

If the tenant has served notice to quit when the contractual term expires but has to remain in occupation unexpectedly, it has no notice period to deal with, but it is running a two-fold risk. The tenant would be liable for ‘mesne profits’ – compensation to the landlord for the occupation – at the open market rent. But far more insidious is the Distress for Rent Act 1737, which says a tenant in this situation is liable to pay double rent. Alternatively, the tenant may be liable under the Landlord and Tenant Act 1730 to pay to the landlord compensation at double the yearly value of the property.

The only consolation for tenants is a recent decision (Ballard (Kent) vs Oliver Ashworth (Holdings)) that the tenant was not liable for double rent or double value where it remained in occupation because the landlord was arguing that the tenant had failed to exercise a break clause, so the lease continued. The landlord could not claim that the lease continued and also claim double value because the tenant was a trespasser under the Distress for Rent Act.

This article is a revised version of a report for TheFB’s sister publication, Property Week.