Fancy a Break? A Warning to Tenants

When leases are negotiated, a tenant will often seek to include a break clause so that the lease may be brought to an end before the contractual term expires, affording the tenant some flexibility should unknown future business needs demand it. Landlord’s are often willing to agree a tenant’s break clause in order to encourage them to take a lease of the property.

Tenants have long been advised to seek legal advice before exercising a break clause. While the specific terms of a break clause are a matter of negotiation between the parties, traditionally a break clause will stipulate a number of conditions which must be met before the ‘break’ is effective.  For example, it is common for a break clause to require the tenant to give the landlord six months’ written notice of its intention to exercise the break clause.  Whilst this may seem straightforward, the notice does need to be served effectively on the correct legal entity in order to be valid.  This requires a number of checks to be carried out by a solicitor as part of the due diligence before serving the notice.

A tenant may also have to give ‘vacant possession’ of the property.  Recently, a case decided by the High Court found that vacant possession of a property was not given where the tenant failed to remove internal partitions it had installed. As a result, the Court found that the tenant had not exercised the break clause effectively.

If you are a tenant and are considering exercising a break clause then you should seek legal advice as soon as possible. It is likely that time will be of the essence and if a break date within a lease is missed then the lease will not terminate and the tenant will remain liable under the terms of the lease.

If you require advice please contact Sarah Dell in our Dispute Resolution Team – sd@charlesfrenchlaw.co.uk