When can a landlord insert a break clause in a commercial property lease?
When B&M and HSBC met in court to contest the terms of a lease, the court’s decision reclarified an almost 70-year-old act. Let’s find out more.
The Landlord & Tenant Act 1954 was set out to protect commercial tenants to continue their business without the threat of eviction from their landlord. However, it also tries to balance the landlord's interests in maximising their property’s value. A recent case and the court’s decision have clarified how this Act works in 2023. In this article, we’ll tell you more about it. If you’re a landlord, it’s worth reading - and enlisting an experienced solicitor to help you navigate this challenging environment.
B&M Retail vs HSBC Bank Pension Trust
In this case, B&M has been renting premises in Willesden from the landlords, HSBC, since 2000. In 2020, B&M served notice that it wanted to renew its lease, but due to the COVID lockdown, the notice never reached the relevant person at HSBC.
Not realising that B&M wanted to renew, they did a deal with the retailer Aldi to take over the site, to demolish and redevelop, subject to planning approval. HSBC proposed to renew the lease with B&M, but with a 6-month break clause that they would serve immediately, requiring B&M to vacate the premises. B&M did not like this idea - and started proceedings.
In this case, the court sided with HSBC, agreeing that there was a genuine chance of getting planning approval for the Aldi redevelopment. While the court appreciates that the Landlord & Tenant Act 1954 is there to protect tenants, it shouldn’t affect the landlord’s right to maximise their assets. It’s seen as a victory for landlords with tenants on leases covered by the Act.
Why it matters
This case matters to commercial landlords and tenants because it shows they can win decisions against tenants and even get a second chance when things go wrong. However, landlords must keep in mind three points:
Evidence – Landlords must provide evidence to support their redevelopment intentions, such as planning permission and funding documentation
Realistic projects – Suggested redevelopment projects must have a real chance of approval and funding
Organisation – HSBC missed B&M’s original lease renewal application. If they had acknowledged it, both sides could’ve avoided going to court
Why you need a solicitor
If you’re a commercial landlord negotiating leases with tenants – regardless of your future plans – you need an expert commercial property solicitor on your team. Your solicitor will examine your contracts, explain your options and draw up agreements that work for both sides. If necessary, they’ll take legal action in your interests. Don’t try to do everything yourself. Get an expert in your corner.
Find out more from Couchman Hanson
At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.
Call 01428 774756 or visit couchmanhanson.co.uk.