Break Clauses

Break Clauses

Break clauses give rise to many disputes.

In the current economic climate, many tenants have premises that are surplus to requirements. A right to terminate the lease before the end of the term can be a very valuable right. However faced with the prospect of an empty property a landlord may look for grounds to challenge the tenant’s right to break the lease.

Two areas often cause problems. Firstly, any notice exercising the break must comply strictly with the requirements of the lease as to timing and method of service. This is something the tenant cannot afford to get wrong. The tenant should diarise a date three to six months before the last date for giving notice, to give himself ample time to consider his options, decide whether to exercise the break, and take advice. This advice will include how much rent has to be paid by the break date and whether the Tenant is entitled to a refund for the period after the lease ends.

The second problem area relates to dilapidations. Many leases make the right to break conditional upon compliance with the terms of the lease down to the break date. We advise tenants to resist this condition where possible, when entering into their lease.

Where it applies, the onus is on the tenant to hand the premises back in the state required by the lease. If works are required, the tenant must complete them before the Break Date. The landlord does not generally have to tell the tenant what works to do or if it is going to challenge the quality of work done.

A tenant who fails to serve a Break Notice correctly and on time, or doesn’t comply with conditions imposed by the break clause, may be saddled with paying rent for unwanted premises.

If you would like to know more about solutions to the problems that can arise in connection with break clauses, please contact Caroline Wilton or Martin Banham-Hall.

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