What should you do if your tenant serves a break notice and then subsequently decides to withdraw it? As a landlord you are happy for the tenant to remain in occupation and the payment of rent to continue. Surely you simply agree that the notice has been withdrawn and allow the lease continues as before? Unfortunately that is not the case. Once a break notice has been served is cannot be unilaterally withdrawn. Even if both parties agree that the notice is withdrawn, service of the notice terminates the existing lease and creates a new tenancy by implication. There are a number of consequences that flow from this. The first relates to security of tenure. As the contracting out procedure has not been followed the tenant may acquire security of tenure under the provisions of the Landlord and Tenant Act 1954 (the ‘1954 Act’). Secondly, a guarantor of the original lease would be released from its obligations when the new tenancy is created. You should also bear in mind that any rent deposits given pursuant to the original lease would not be available for the landlord to be drawn down on in the event the tenant incurs arrears under the new tenancy.
WHAT SHOULD YOU DO?
Doing nothing may be an option if the lease is within the security of tenure provisions of the 1954 Act and there are no guarantors or rent deposits. In order to avoid uncertainty, we advise that a new lease and rent deposit deed (if applicable) are entered into with the consent of the guarantor. Or, if the guarantors obligations are contained in separate security documents, the guarantor should be asked to enter into new documents in respect of the new lease.
For more information speak to Emma Foster, Senior Associate in Druces LLP’s Property team.