Ending property leases for HR professionals – Part 1: Moving on
31 / 10 / 2016
Wedlake Bell commercial property partner Suzanne Gill is providing a series of articles for HR professionals to give them a better understanding of the issues accompanying surplus premises.
Many companies are reviewing their staff requirements in the light of the Brexit referendum result and long term trends such as increasing automation in the workplace. Sometimes a reduction in employee numbers goes hand in hand with a reduction in the requirement for premises – and often hard-pressed HR teams find they are dealing with lease disposals as well as redundancy programmes.
The first thing to be aware of is that, much like an employment contract, some clauses are implied by law into the landlord and tenant relationship. It’s important to read the lease and be aware of its terms, but the lease itself is not the whole story. In particular, the Landlord and Tenant Act 1954 gives occupiers of business premises in England and Wales a right to remain at the premises following the end of the lease, unless certain procedures are followed. This is known as “security of tenure”. If your lease is protected by the Landlord and Tenant Act you might find that the tenant company is liable to pay rent for longer than the dates specified in the lease, so it’s important to check whether this Act applies.
There are a number of possible ways of leaving premises, or reducing your occupation of them.
- the lease comes to an end
- the lease contains a “break” right allowing either landlord or tenant to end the lease at a certain time, which you make use of
- you transfer your lease to another company, meaning they step into your shoes as tenant
- you underlet your premises, or part of them, to another company
Some of these options require you (as tenant) to get landlord’s consent first.
Before diving into these, don’t forget the right to share occupation of premises with group companies. If there’s a chain of ownership of more than 50% of the shares, the lease will often allow group companies into the same space without a lease between the two companies. Cost sharing becomes an internal accounting exercise. Other space sharing arrangements, including those with companies the business collaborates with, are likely to be a breach of your lease. More formal ways of dealing with surplus space will be considered later in the series.