What is a Break Clause?
A break clause allows either a Landlord or a Tenant (normally the Tenant) to bring a fixed term lease to an end. The right to break the lease may arise on one or more specified dates or be exercisable at any time during the term on a rolling basis. The break clause may only be exercised if any conditions attached to it have been satisfied (for example providing vacant possession). Break clauses will be strictly construed by the Courts and any conditions must be strictly performed. There has been much litigation on break clauses and Tenants have been bound to continue with the lease through failing to fulfil these conditions.
Practical Issues to Consider
Once a break notice has been served it cannot be withdrawn unilaterally.
- Tenants should comply with all the requirements of the break clause and keep evidence.
- Make sure the break notice is served in good time and in accordance with the lease terms.
- Keep a record of the posting or delivery of the break notice.
- Consider carrying out a compliance audit with a Surveyor’s advice before serving the break notice to ensure compliance.
- Pay any outstanding sums due even if these are in dispute. Payment can be made on a without prejudice basis.
- Check whether default interest may be due on past arrears. It may be difficult to know precisely how much default interest is due so err on the side of caution. The cost of doing so is likely to be far less than the cost of remaining bound under the lease.
- Ask the Landlord for confirmation of the steps required to comply with any conditions.
- If you agree to carry out works to the property before the break date be careful to ensure those works are completed by the break date.
- Consider asking the Landlord to accept the break notice on payment of an agreed sum as a one off payment for any outstanding breaches.
If you would like to discuss your Lease with any of our Commercial Property Experts then please get in touch with one of the team. Mark Ollier, Mark Carlisle, Frances Griffiths, Sanjeev Harash or Brian Maxwell will be happy to help.