‘Smelly’ Chinese Restaurant Triggers Lease Dispute

Tenants who violate the terms of their leases can be forced to move out and hit hard in the pocket. In one case, commercial tenants who sublet part of their premises to a Chinese restaurant without their landlord’s permission had their lease forfeited and were given six months to sell up and leave.

The tenants held a long lease in respect of a parade of shops with residential flats above them. The lease, which had been bought at a premium, yielded rack rent from sub-tenants of £133,000 a year and thus had considerable value. One of the terms of the lease was that no part of the premises could be sublet without the landlord’s consent.

In breach of that term, the tenants sublet a shop to a Chinese restaurant, which was the subject of much complaint from the landlord’s residential tenants in respect of poor waste management, staff smoking breaks, outdoor food preparation and noisy air conditioning units.

The landlord’s response was to forfeit the lease and, in refusing to grant the tenants relief against that decision, a judge found that their failure to obtain the landlord’s permission was deliberate and that they had shown a conscious and cynical disregard for their obligations under the lease.

In allowing the tenants’ appeal, the Court of Appeal noted that they had since mended their ways. The Chinese restaurant’s sub-lease had been surrendered and the shopping parade was now being properly managed. The Court granted relief from forfeiture, but only to the extent of granting the tenants six months in which to market and sell their lease.