The pandemic has caused many tenants and their advisers to start looking at ways that they may be able to escape from their (often significant) future lease liabilities. This blog focuses on one possible avenue of attack for tenants. Can a tenant allege that a landlord is in fundamental breach of a lease and therefore accept that breach and seek to claim that the lease is at an end?
The short answer is ‘yes’ in certain (very) limited circumstances.
How does it work?
A lease is in essence a contract. In simple terms, if party A commits a fundamental breach of contract (that is one that goes to the heart or the root of the contract) party B can elect to treat the contract as at an end, which releases both A and B from future performance but allows B to sue for damages for the breach.
Historically, there was some debate about whether or not a lease could be terminated in this way because a lease is both a contract and an interest in land. The current consensus is that a lease can be terminated for fundamental breach of contract but the circumstances in which that can properly be done are likely to be rare.
A typical lease gives a landlord a number of different remedies for breach by the tenant and will usually for example set out specific grounds upon which the landlord can forfeit the lease and take the property back.
This blog looks at the question of fundamental breach from the perspective of the tenant. What might a landlord do or fail to do that could be characterised as a fundamental breach?
Reported cases are few and far between, but below are some examples of landlord breaches that might get the tenant over the high threshold:
- Significant breaches of landlord repairing obligations that for example, make the property unusable by the tenant
- Significant failures to maintain common parts such that for example, on an estate, access to the property is significantly impaired
- Where for example, the landlord has taken steps or granted rights to a third party that render the property unfit for the purpose for which the lease was granted. A recent example is where a landlord of a ‘high class’ shopping centre granted a lease to a pawnbroker which amongst other things attracted ‘undesirable’ clientele to the centre.
A note of caution – this is a high risk strategy on the part of a tenant and the consequences of getting it wrong will no doubt be considerable. Expert advice should be taken.
This blog was written by: Michael Stewart
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assis