Case law: Sub-tenant's notice requesting new tenancy was valid despite landlord terminating head lease early under break clause
Landlords planning to exercise a break option should consider whether any tenants or sub-tenants may become entitled to serve notice requesting a new tenancy, even if the new tenancy's starting date will be before the contractual expiry date under their lease, following a recent ruling.
This update was published in Legal Alert - May 2017
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A landlord let a property under a lease that expired on 16 January 2016, and which contained a break clause allowing the landlord to end the lease.
The tenant then sub-let to another tenant which, in turn, sub-let to a fourth tenant. The effect of the fourth tenant's lease was that the fourth tenant had a statutory right to remain in the property after its tenancy ended (on 15 January 2016).
The landlord exercise the break clause so that the first lease ended on 17 July 2014. The fourth tenant relied on its statutory right to remain in occupation. Then, two months later, the fourth tenant served a notice requesting a new tenancy with effect from 1 July 2015.
The landlord argued that the fourth tenant could not legally serve notice requesting a new tenancy from 1 July 2015 because the expiry date of its lease was not until 15 January 2016, so the notice was invalid.
This issue had not arisen before, but the High Court ruled that a notice which specified a commencement date for a new lease that was before the contractual expiry date of the old one could be valid in certain circumstances, including the circumstances in this case. The notice could validly request a new lease starting before the contractual expiry date of the previous one.
- Landlords planning to exercise a break option should consider whether there are any tenants or sub-tenants who might become entitled to serve a notice requesting a new tenancy, even if the new tenancy's starting date will be before the contractual expiry date under their lease
Case law: Fast Drinks Ltd v Cetyl International Group Inc  EWHC 3501
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