Commercial leases are automatically protected by the security of tenure provisions of the Landlord and Tenant Act 1954 (the 1954 Act). This means that a lease will not come to an end at the expiration of the fixed term and a tenant will normally have a statutory right to renew a lease, which the landlord may only oppose on certain statutory grounds. Some leases are ‘contracted out’ of the 1954 Act, meaning the lease will automatically come to an end on the contractual expiry date, and the tenant will not be entitled to renew the lease.
Leases that fall under the protection of the 1954 Act are often renewed and so to provide some flexibility to the parties, a break clause is typically included in the lease. A break clause in a lease allows either the landlord and/or the tenant to end the lease early, on one or more specified dates or on a rolling basis. Usually this requires the breaking party to serve a break notice on the other party, giving the minimum notice period specified in the lease.
B P Collins’ property team explores the case of Vistra Trust Corp (UK) Ltd v CDS (Superstores International) Ltd, where the interaction between the 1954 Act and a tenant break came into conflict.
The case concerned B&Q’s lease over a store in Widnes, Cheshire, which was granted for a term of 21 years ending in February 2029 and was protected under the 1954 Act. The lease had the benefit of a tenant break on or at any time after 11 February 2023, subject to the tenant serving at least six months’ notice on the landlord. B&Q served a break notice in 2018, giving the landlord four years’ notice.
In November 2020, the lease was assigned by B&Q to CDS. CDS was aware that a break notice had already been served but wanted to agree a new lease. After the service of the break notice, but prior to the break date, the landlord advised CDS that it would not be renewing the lease, and that CDS would have to vacate the premises on the break date.
CDS intended to rely on the statutory protections under the 1954 Act by requesting a new lease under section 26. The landlord rejected this on the basis the tenant could not rely on those protections since the lease had effectively been broken. Ultimately, the court agreed with the landlord that the break notice was valid and would bring the lease to an end on the break date.
One of the main takeaways of this case is that once a break notice has been served, it cannot be undone, even if the lease is protected by the 1954 Act. The tenant must be absolutely sure it wishes the lease to end before serving a break notice.
Our property lawyers have a high level of experience in dealing with commercial leases. If you would like advice on break notices or the 1954 Act and how they might affect your lease, please contact us on enquiries@bpcollins.co.uk or by phone on 01753 889995.
