Many commercial leases ban tenants from subletting the premises and breaching such embargoes can have severe consequences. In one case recently reviewed by litigation expert David Watson, tenants of a local authority-owned café sacrificed their rights by subletting it to a company.
The tenants, who were father and daughter, held a 10-year lease in respect of the café, which was set in the former stables of a stately home. The lease included a clause that forbade them from subletting the premises. As the expiry date of their lease approached, however, they sublet the café to the company, of which the daughter was the sole shareholder.
After finding out about the unauthorised sublease, the council purported to forfeit the lease by peaceable re-entry. It had previously informed the tenants that their lease would not be renewed. The tenants and the company responded by launching proceedings, seeking a declaration that the forfeiture was invalid. A claim was also intimated that the company enjoyed security of tenure in respect of the café under the Landlord and Tenant Act 1954.
In ruling in the council’s favour, the High Court rejected arguments that it had waived its right to forfeit the lease by continuing to demand and accept rent after it became aware that the company was in occupation of the café. The council had acted swiftly on learning of the lease breach and was granted a declaration that both the lease and sublease had been lawfully brought to an end.