When a tenant wishes to break a lease with its landlord, it is normal for the termination to be dealt with by negotiations of terms between the tenant and landlord.
In a recent case, a tenant served notices on its landlord (The Legal and General Assurance Society) that it wished to terminate the two leases it held. The notices were given in good time to come into effect in December 2004. The tenant was required under the leases to pay its rents and to yield up the properties in good repair and with vacant possession. After a period of negotiation, the landlord and tenant agreed, in October 2004, a settlement figure for the dilapidations under the leases and the tenant covenanted that it would keep the premises in at least as good a condition until it vacated them.
The tenant then started trading elsewhere, but used the premises for storage after the agreed termination date. The landlord claimed that the tenant had left some items in the premises and had not yielded up the keys. Accordingly, argued the landlord, the tenant’s right to terminate the leases under the break clauses had been forfeited as it had failed to comply with the requirement that it delivered the properties with vacant possession. In the view of the landlord, the leases were therefore continuing. The tenant argued that if the leases had been continuing, the landlord had waived compliance with the other conditions of the break clause.
The landlord’s claim failed. It had accepted the break notices and had therefore agreed by implication that it had waived the right to reject the break notices. The tenant’s failure to surrender the keys was not sufficient to prevent vacant possession being given.