|
Head-lease - effect of ending |
|
L grants a lease to T, who then sublets to sub-T. What is the effect on
sub-T if the head-lease (between L and T) is ended?
- Ended by a break clause: if T exercises a break clause in the headlease
then that will bring an end to the sublease. However, sub-T will
have LTA 1954 business tenancy protection (unless that protection
has been validly excluded).
- Ending by surrender or merger: T cannot derogate from its grant to
sub-T. Accordingly, the sublease will remain in existence even if the
head-lease is surrendered or merged.
- Ended by forfeiture: the forfeiture of the head-lease will automatically
bring the sublease to an end. But, sub-T has the right to seek relief
from forfeiture under s146(4) LPA 1925.
- Ending by disclaimer: a disclaimer by a liquidator or trustee in
bankruptcy only ends the head-lease if T is in exclusive occupation.
Otherwise, the head-lease remains in existence and sub-T will have
the right to apply for a vesting order under IA 1986 (so as to vest the
head-lease in sub-T).
Note that it is only in the last decade or so that break clauses have
become commonplace. From a practical point of view, when acting on
behalf of a prospective sub-T, do take care to ascertain whether the
head-lease contains a right on the part of that T to terminate the headlease
by notice to quit/break. If there is such a break clause, and sub-T
is contracting out of LTA 1954, then sub-T is exposed. See article in [2008] 204 Property Law Journal 13. © Practical Lawyer
|
|
March 2008 |