Nailah Robinson

Real Property II Tutorial 4: Termination of Leases

The Determination of a Lease

If the tenant simply moves out without bringing the lease to a proper end, the landlord may be able to sue him for specific performance or for damages for breach of contract. On the other hand, if the tenant refuses to leave after the lease has ended, the landlord will likely have to seek the Court’s assistance in removing him.

How does a lease come to an end?

1. Expiry

A fixed-term lease expires automatically at the end of the term. The tenant who remains in possession may be converted to a period tenant, one at will or one by sufferance.

2. Notice

The fixed-term lease cannot be determined by notice unless this is expressly agreed upon. Periodic tenancies can usually be determined by notice, generally referable to the period – e.g., a weekly tenancy can be determined by one week’s notice on either side.

3. Forfeiture

Most leases contain a forfeiture clause which states that the landlord may forfeit the lease where the tenant breaches the covenants. The tenant’s obligations may also be framed as conditions, so that the continuance of the lease is conditional on the tenant’s actions.

Forfeiture may occur by peaceable re-entry but this has been described as “a dubious and dangerous method of determining a lease” (Billson v Residential Apartments [1992] 1 AC 494). The landlord may find himself criminally liable, and should only use this method where it is has become abundantly clear that the tenant has permanently vacated the premises.

The better option is for the landlord to begin court proceedings for possession. Statute generally provides that where the rent is less than a certain amount, the matter may be brought in the Magistrate’s Court. Otherwise, it should be brought in the High Court (where the legal fees are higher).

Note that the landlord may be unable to forfeit a lease if he has waived the breach. This occurs where he, with knowledge of the breach, does some unequivocal act which recognises the continued existence of the lease. Such acts include: demanding, suing for or accepting rent falling due after the breach, and agreeing to a new tenancy.

The waiver extends only to the particular breach and not to all future breaches. Breaches which continue after the date of the waiver will normally give rise to a fresh right of forfeiture.

Procedure for Forfeiture

For non-payment of rent

By law, the landlord must have made a formal demand (attending the demised premises to demand the exact sum due on the day when it falls due at a convenient hour before sunset), but every well-drawn lease provides that the lease may be forfeited if the rent is a specified number of days in arrears “whether formally demanded or not”.

The tenant has a right to have the action discontinued if all arrears of rent and costs are paid at any time before the High Court case, and not less than five days before the Magistrate’s Court case. Where the landlord has commenced an action against the head tenant, any subtenants have the same right to seek a discontinuance on payment of the arrears.

The tenant (and subtenant) may also apply to the Court for relief from forfeiture. The Court may grant if the tenant pays all the rent due and all the expenses to which the landlord has been put, and if it is just and equitable to grant the relief. Relief may be granted to an insolvent tenant, and to one who has been a bad payer in the past, but not where the tenant’s conduct has been sufficiently shocking, or where no rent has been paid for many years.

For breach of other covenants

The landlord must serve a notice on the tenant requiring him to remedy the breach if possible, and requesting compensation if he so desires. He must give the tenant reasonable time to comply.

Some breaches may not be remediable, such as breach of covenant against immoral or illegal use (but each case turns on its facts), and breach of covenant against subletting.

The tenant may apply for relief. Relief is always discretionary, and may be refused. The Court will consider the tenant’s conduct, the nature and gravity of the breach, and the wilfulness of the breach.

4. Surrender

A surrender is a consensual transaction between the landlord and the tenant. It is different from notice to quit because the notice is effective whether or not the recipient consents. Note also that a surrender does not destroy a sublease which remains effective against the landlord. However, a notice to quit will terminate the sublease.

Surrender may be express (which requires a deed) or by operation of the law. It is implied by the law where the conduct on the part of both landlord and tenant is unequivocal. Abandonment of the premises without more is not surrender, nor is delivery of the keys to the landlord. What is normally required is that the landlord has re-let the premises.

Surrender may also occur where the same parties sign a new lease.

5. Merger

This occurs where the tenant purchases the property, or where a third party acquires both the lease and the reversion. Note that this does not occur where it is not intended.

6. Frustration

As a general rule, the doctrine did not apply to leases which were an estate in land. However, since National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, it was held that leases could be frustrated in the same way as any other contract. However, the cases are likely to be very rare. For long term leases, the tenant is considered to have assumed the same risks as a purchaser, so that if the property is destroyed or there has been some other catastrophe, the contract is still perceived as persisting.