Options In Leases – How Secure Are They?

It’s not that common in leases for a tenant to have the option of a new lease because most of the time a tenant relies on its rights under the Landlord and Tenant Act 1954 which allows business tenants to request a new lease from the landlord, and most of the time a landlord has to grant the new lease.

However in a recent case a lease did contain an option for the tenant to have a new lease and the landlord tried to use rent arrears that had built up as a result of covid closures to get round that and terminate the option.

All professionally drafted leases will include forfeiture provisions which enable a landlord to terminate the lease if the tenant doesn’t comply with its obligations in the lease (for example non-payment of rent).  This option included a provision that the landlord could terminate the option if any forfeiture event had arisen.  The tenant had not paid all the rent owing due to covid lockdowns so technically a forfeiture event had arisen and the landlord served notice on the tenant saying the option had been forfeited as a result (even though the landlord did not seek to forfeit, or terminate, the lease).

If a lease is forfeit then a tenant may apply to the court for “relief” from the lease being forfeited and a court will often grant that relief subject to the tenant putting good what was wrong.   The question in this case was whether a court could grant relief in respect of the option rather than the lease itself.  The court decided that it could; the landlord lost and the option was reinstated.

If you are a tenant dealing with forfeiture or a landlord considering taking action to forfeit a lease it is worth taking legal advice to find out what your rights are and what approach a court is likely to take. Call our specialist team on 0800 088 6004.