Termination of Lease

Circumstances of Termination

Leases may terminate for a variety of reasons. A lease may terminate because the term of the lease has expired. A tenancy without a fixed term, typically, for successive periods may be terminated by notice by either party. The lease may terminate by reason of the non-payment of rent or breach of obligation by the tenant. The landlord may seek to terminate the lease in breach of its obligations.

Where the tenant of commercial premises has occupied the property as a tenant for more than five years it will generally acquire a right to renew the leases for (successive) periods between 5 and 20 years, at their choice. Where the tenant is not in breach of its obligations and the landlord seeks possession by reason of the expiry of a lease of commercial premises, the tenant may be entitled to counter the claim, by way of way of its statutory right under landlord and tenant legislation to a new lease.

There is a separate scheme of rights for residential tenants, which is discussed in other sections. Residential tenants enjoy protection in four-year cycles, Disputes are not heard by the courts, but by the Private Residential Tenancies Board (PRTB).

The following discussion deals with termination of commercial leases, where there are no statutory rights of renewal.

Termination of Periodic Tenancies

A periodic tenancy will typically exist where there is no lease for a set term. They also commonly arise where there was a fixed term lease, but it has expired and the landlord and tenant relationship continue by mutual consent with the payment and acceptance of rent.

In the case of periodic leases (i.e. monthly, yearly or weekly) the lease may be terminated by either landlord or tenant by giving notice at any time.  There need not be a reason, good bad or indifferent.  A periodic tenancy is terminated by service of a notice to quit.  The rules are technical.  The notice must be of a certain length.  Monthly tenancies generally require a month’s notice, weekly tenancies a week’s notice, and yearly, six months’ notice. A quarterly tenancy requires three months notice.

Notice to quit is not necessary when a lease is for a specific term expires.  On the date of expiry of the term (i.e. the lease period), the tenant is obliged to give up possession.  The tenant may, of course, have a right to a further lease.  The landlord may agree to continue to accept rent, in which event the term ends, but a new period to period lease commences.

A notice to quit must generally be in writing and addressed to the tenant.  There are specific legal requirements for agricultural and residential properties.  For commercial properties, the requirements arise from common-law.  The notice must be clear and unambiguous, giving notice to deliver the property at its termination. The notice must expire on a gale day and be not less than the required period of notice. The gale day is generally the rent day.

Personal service is generally required on the tenant.  If personal service cannot be effected in the case of a company, service on their registered office is sufficient.  Service by post may be sufficient, but there may be difficulties of proof.  A requirement for a notice may be waived by either party.  It may be waived by the landlord by a subsequent notice or by requesting or accepting rent.

Where a tenancy has terminated a tenant is obliged to pay compensation for the use of land known as the mense rates if he does not surrender the premises.  This is usually equal to the amount of rent and other sums due under the lease. This will arise where the landlord makes clear that he is not continuing the letting and required possession of the premises.

Termination for Breach

A lease for a fixed term may be terminated early by reason of the tenant’s breach of the lease.  The process of termination of the lease and resumption of possession by the landlord is called forfeiture.

Generally leases specify that the lease will terminate if rent is in arrears for a certain period, usually 7 to 21 days. Where there has been any other type of breach of tenant’s obligations under the lease (non-financial), it is necessary for the landlord to serve a notice specifying the breach and giving the tenant an opportunity to rectify it.  In the case of non-payment of rent, this notice is not required. In some cases, the rent must be first demanded.

When a lease terminates by reason of non-payment of rent or after failure to perform the obligations following a notice of the breach, the landlord can enter the premises and terminate the lease.  This is only permissible if it can be done peacefully.  Peaceful repossession means that the premises aren’t broken nor is the tenant overpowered by force of numbers.  In an Irish case where a landlord had a duplicate key and was able to enter and change the locks in the tenant’s absence, there was held to be a valid peaceable re-entry.

The wording of the particular lease will be critical. It will specify whether a demand for the rent must first be made. It is a matter of interpretation of the lease as to whether it can be terminated for breach of condition.  Most modern leases provide that upon breach of condition, the lease can be terminated.  Sometimes the breach must be serious but the wording of the lease will determine the position.

In the case of a breach other than for non-payment of rent a notice must first be  served by the landlord, giving details of the breach, specifying the breach and if it is capable of being remedied requiring it to be mediated or in any case paying compensation for the breach and if the tenant fails within a reasonable time to remedy the breach or make compensation to the landlord the property may be re-entered.

Where the landlord cannot peaceably re-enter the property a Court Order will be necessary.  It is generally advisable for a Landlord to obtain a Court Order to re-enter a property, as there may be a risk of a successful claim for compensation if a peaceful entry cannot be effected.  Forcible entry legislation makes it an offence to forcibly enter the property.  This is irrespective of whether the forcible entry is against a tenant whose lease is alleged to be broken.

Relief Against Forfeiture

Sometimes a tenant may fall to be in breach of its lease in circumstances where it has added substantial value by way of works, to the premises.  The premises may attract goodwill and be valuable to the tenant. By forfeiting the lease, retaking the premises and the terminating the tenant’s rights entirely, the landlord may obtain an unfair windfall.  In order that the tenant does not suffer and inequitable and disproportionate loss. the courts may afford tenants relief against forfeiture.

Relief against forfeiture is available under the legislation, in the case of breach of lease covenants. It may be available, under discretionary equitable principles, in the case of non-payment of rent. Where a landlord is seeking a court order for possession of property by reason of forfeiture, the court has power to refuse,  having regard to the conduct of both parties and all the circumstances.

The court may grant relief to the tenant on such terms as it may set, by directing the payment of damages or expenses by the tenant or grant an injunction against future breaches, as it thinks fit. The court will not, however, allow the tenant to simply stay on in breach of lease nor will it write a new lease. Relief against forfeiture will require that tenant complies with his obligations but may give more time to do so. It mitigates the harshness of strict observance but does not excuse it.

Equable relief may be available where relief is due to failure to pay rent.  Where the landlord has re-entered the premises or forfeiture is on the basis of a non-payment event there is an equitable power for the Courts to give relief on such terms as it sees fit.  Courts lean against forfeiture for non-payment of rent where this is disproportionate.  It will generally be a condition that all arrears costs and outstanding breaches must be paid or remedied.  Equitable relief may not be automatically available.

Relief may be sought in proceedings by the landlord for possession or in proceedings brought by the tenant before or after re-entry has occurred.  It is available where the landlord has re-entered the property, other than on foot of a Court Order.  The court has a broad discretion and will have regard to the proportionality of the loss and gain to the landlord and tenant, in the circumstances.

Where a lease is forfeited and there are sub-leases, the sub-lessees may make an application for a court order that the subleases are not forfeited and that the sub-lessees will hold directly as tenants of the head landlord, who has forfeited their landlord’s lease.  In some circumstances, the Landlord and Tenant Acts provide that a sub-lease continues in existence if the head lease is forfeited as if the head landlord is the immediate lessor.   The rent may be subject to increase.  Statutory relief as above may be allowed to the sub-tenant.

In the case of longer,  ownership type leases, with the rights to purchase out the ground rent (i.e. the freehold interest), there are prohibitions on forfeiture of the lease for non-payment of rent or breach of condition. In any event, where the prohibition does not apply,  tenants or lessees under such leases are close to being absolute owners and the Courts would rarely allow forfeiture of a lease in such circumstances, for accumulated arrears of ground rent.

A lease can terminate by a deed or by a physical handing back of possession at any stage, with the agreement of the landlord and tenant. This is a surrender. A deed handing back a lease or even another document proving hand back can be subject to stamp duty.  Stamp duty would arise if the value of the interest handed back exceeds the stamp duty threshold.

A handing back of the premises by the tenant without consent or an abandonment of it would be a breach of the lease. The landlord would be entitled to sue for the future loss of rent, in much the same way as with any other contract.

Termination for Redevelopment

Under landlord and tenant legislation an application may be made to terminate a lease for the redevelopment of an obsolete area. There are several conditions.

• the court must consider it reasonable to do so;
• the building is an obsolete area or having regard to its age, condition and character, repairing would involve excessive expenditure relative to the value
• the building cannot be profitably used unless reconstructed or altered to a substantial extent and rebuilt and
• the landlord has a scheme of development which includes planning permission.

The Court will only make an order where the lease has an unexpired term of between 3 and 25 years.  The tenant will usually be entitled to compensation for disturbance.

Various Other Bases of Termination

Various legislation allowing legislation permitting a Court to terminate the lease where it is used for an unlawful or dangerous purpose. This includes use as a brothel or for the sale of drugs.

Sometimes a break option may be provided in a lease.  The break option may allow termination of the lease, at generally the tenant’s option at specific dates.  Generally, a notice must be given for a certain period.  The general presumption is that time is of the essence i.e. that the dates are strict and if missed cannot be served late.  The wording of the lease will determine the position.

In a liquidation, a liquidator has the power to apply to Court to disclaim an onerous lease which is not saleable.

Ejectment Proceedings

A Court Order may be necessary to obtain possession of property where a lease has terminated or where there has been a breach of the tenant’s covenants in the lease. Proceedings are generally taken in the Circuit Court.

There are slightly different types of procedure depending on the reason for termination. Some procedures are (relatively) shorter and less complex than others.

Sometimes the Courts will give relief to tenants and will not grant possession unless there have been continuous failures to pay.  If the tenant is granted relief from forfeiture this will generally be on conditions that arrears of rent are paid. Although the courts, in theory, grant possession orders to a landlord where there is a clear breach, they in practice tend to give tenants the opportunity to remedy breaches and lean against forfeiting leases.  Sometimes this is more likely if the landlord or tenant are not perceived to be on equal terms.

Where a lease is terminated by notice it is possible to seek possession based on the tenant’s overholding.  The tenant may seek to exercise a statutory right to a new lease.  These rights are the subject of other articles.