20th February 2017
Breaking up is hard to do
The recent case of Fast Drinks Limited v Cetyl International Group Inc (2016) highlights the need for landlords to consider the potential security of tenure of sub-tenants before exercising a break clause.
The superior landlord (Cetyl) had successfully exercised its right to break the head lease which was effective on 17th July 2014, bringing all interests granted in the head lease to an end, including Fast Drinks’ sub-lease which was for a term ending on 15th January 2016.
Fast Drinks’ sub-lease had not been contracted out of the security of tenure provisions in the Landlord & Tenant Act 1954. They served a Section 26
Notice on Cetyl requesting a new tenancy from 1st July 2015.
Cetyl argued that the Section 26 request was invalid on the basis that under Section 26(2) of the 1954 Act, the new lease could not commence until 16th January 2016 which was the date when Fast Drinks’ sub-lease would have expired had Cetyl not exercised the break clause.
The Court rejected Cetyl’s argument. It held that the proviso in Section 26(2) of the 1954 Act did not apply because this should be regarded as a post-term
request as the sub-tenancy came to an end in July 2014 when the break was exercised. The sub-tenant’s request was therefore held to be valid and the
matter was transferred to the County Court to issue directions for the application for a new tenancy.
The moral of the story is that any landlord wanting the benefit of a break clause in order to recover possession should ensure that all leases are contracted
out of the security of tenure provisions of the 1954 Act.
For more information on landlord and tenant disputes, contact Andrew
Linton on firstname.lastname@example.org or 01892 502 323.