Why would a landlord buys its tenant's leasehold interest in the landlord's property?
Pls [ELI5](https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=5&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwjv1fnQ8MPmAhVXZ80KHVktAh0QFjAEegQIBBAG&amp;url=https%3A%2F%2Fwww.dictionary.com%2Fe%2Fslang%2Feli5%2F&amp;usg=AOvVaw2mNEOYsLiFa7bUyShYYwlC). The Landlord  (*Hughes*) unmistakably owns the property leased to the lessee (*Metropolitan Railway Co*). Thus why'd a Landlord buy the lessee's leasehold interest in the landlord's own property? Why wouldn't the Landlord just authorise the lessee to breach and end the lease with no penalty, and return the property to the Landlord? 

[Richard Taylor](https://www.uclan.ac.uk/staff_profiles/richard-taylor.php), [Damian Taylor](https://www.slaughterandmay.com/who-we-are/partners/damian-taylor/). [*Contract Law Directions* (6 edn 2019)](https://www.amazon.co.uk/Contract-Law-Directions-Richard-Taylor/dp/0198836597/ref=dp_ob_title_bk). p 92.

&gt;However, in *Hughes v Metropolitan Railway Company* (1877), the House of Lords gave effect to
conduct which amounted to a promise as to future conduct. The landowner Hughes served
notice on the Railway Company to perform repairs on the property it leased from him within six
months, on pain of forfeiture of the lease. The Railway Company said that it would carry out the
repairs but, before it did this, **it wished to hear from Hughes on its proposal for Hughes to buy
the Railway Company’s leasehold interest in the property.** The parties entered into negotiations
but they did not arrive at an agreement and Hughes sought to eject the Railway Company from
the property six months after it had served the notice of repair (the Railway Company performed
the repairs two months later). 

Paul Davies. [*JC Smith's The Law of Contract* (2018 2 ed)](https://www.amazon.co.uk/Smiths-Law-Contract-Paul-Davies/dp/0198807813/ref=dp_ob_title_bk).  p. 92.  

&gt;But does *Hughes v Metropolitan Railway Co* really
support
the principle enunciated in *High Trees*? This was a case involving a waiver. A landlord
gave his tenant six months’ notice to repair the premises, the lease being forfeitable if the
tenant failed to comply. **During the six months, the parties entered into negotiations for
the sale of the lease to the landlord** and, with the landlord’s concurrence, no repairs were
done while the negotiations were in progress. The negotiations failed.

[*O'Sullivan &amp; Hilliard's The Law of Contract*](https://www.amazon.co.uk/OSullivan-Hilliards-Law-Contract-Janet/dp/0198807821/ref=dp_ob_title_bk) (2018 8 ed). p. 114.

&gt;5.77 &amp;nbsp;  &amp;nbsp; &amp;nbsp; Denning J was here referring in particular to the case of *Hughes v Metropolitan Railway*
(1877). There, a landlord served a notice on his tenants to carry out certain repairs to
the leased property within six months. (The lease provided that the tenants were responsible
for repairs to the property and that the landlord was entitled to terminate
(‘forfeit’) the lease if the repairs were not performed in accordance with the notice.)
The tenants replied saying that they would carry out the repairs, but **wondered whether
the landlord might be interested in buying out their leasehold interest and suggested
that the repairs might be deferred pending any negotiations.** The landlord entered into
negotiations and, while these were going on, the tenants deferred the repairs. After negotiations
broke down, the tenants began the repairs but they were not completed within
the initial six-month period, whereupon the landlord attempted to forfeit the lease.
[{"id": "fbg8bfl", "text": "Because they have a better use for the property and the current tenants lease is interfering with the new use. For example a railway station that has an area leased for baggage storage and a restaurant wants to locate there.", "replies": [], "depth": 1}, {"id": "fbgcbli", "text": "because they obviously need it back and can make more $ by taking it back.", "replies": [], "depth": 1}, {"id": "fbghqsj", "text": "I\u2019m working on a deal right now that involves a large hotel on leased land owned by a not for profit entity who does not operate the hotel.  The tenant has had a leasehold interest for 53 years.  The lease is up in 7 years and the tenant recently came to the landlord and requested a long term extension of the lease.  It is known that they are in the process of selling similar assets, it is also likely they would sell this asset but the short lease term makes that impossible. \n\nHere were my thoughts, put concisely for time:\n\nTenant is making good money, there is value to the 7 years remaining on the lease.\n\nThere is also value in the offering of an extension of the lease as the tenant will be in a position to make a nice profit from the extension when they sell their interest.\n\nIf the landlord does nothing they will own a fee simple interest in the building in 7 years with no payment required.\n\nThe landlord has a business need for the land, long term planning that requires land adjacent to their existing infrastructure, and needs to maintain control of that land.  They don\u2019t foresee using the land for another 30-40 years though. \n\nHowever;\n\nThe property requires cap ex today to remain viable.  The current operator has no interest or requirement to make that investment.\n\nThey also can not get a bank loan for that cap ex due to the short lease. \n\nIf the landlord were to retain fee simple interest I also have another operator who would step in and make the investment.  \n\nMy solution was for the landlord to buy out the remaining term of the current tenants lease, using the NPV of the cash flow over the remaining term of the current lease, and then entering into a long term agreement with the new operator to manage the asset and make the necessary investment to keep the property viable for another 30-40 years.", "replies": [{"id": "fc1yduo", "text": "Thanks. Upvoted. Can I follow up pls?\n\n &gt; It is known that they are in the process of selling similar assets\n\n1. Can you please clarify who \"they\" are? Pls feel free just to edit your post, rather than adding a new comment.\n\n &gt;it is also likely they would sell this asset but the short lease term makes that impossible.\n\n2. Why does the short lease term make selling impossible? \n\n &gt;There is also value in the offering of an extension of the lease as the tenant will be in a position to make a nice profit from the extension when they sell their interest.\n\n3. How can you be certain of \"a nice profit\"? What if a recession happens soon and many people stop staying at hotels?", "replies": [{"id": "fc1ywpj", "text": "The current tenant is a REIT.  I know they are in the process of selling similar assets because they have said as much publicly, there is also a trail of similar assets they have sold recently.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fbgodav", "text": "Canceling the lease would have been the preferred option, but buying the tenant out was the second preferred option. \n\nThey issued repair notices to make staying there more expensive. The tenant knew the landlord wanted them out, but wants to get paid for squatting on the lease. \n\nImagine your landlord wants you out of your apartment. Would you just agree to cancel your lease and walk away for free?", "replies": [], "depth": 1}]