A break clause in a lease enables a tenant to vacate the property before the original term comes to an end. The exercise of such a break notice may sound straightforward on the face of it but it can lead to serious legal implications if the tenant fails to exercise the break correctly. The landlord will often take action in order to ensure that if there has been such a failure he recovers all monies due to him under the lease. The courts have recently demonstrated that a strict stance will be taken in these cases in order to ensure that the relevant conditions in the lease have been satisfied.
An unconditional break clause would be preferable to the tenant but typical break clauses normally specify a number of conditions a tenant must satisfy in order to correctly exercise the break. The tenant must ensure that he takes the steps required in order to comply with all conditions of the break clause. A landlord will not be under an obligation to inform a tenant even if he knows that the break notice served is defective. The landlord is thus able to hold back until the relevant notice expiry date to bring this to the attention of the tenant. The tenant would thus remain bound by the terms of the lease.
Who can exercise the break?
A break clause can be stated to be personal and in which case will benefit the original tenant only. This means that the existing tenant may not be able to exercise the break if the tenancy has been transferred at some stage in the past.
When should the break notice be served?
The lease will specify the exact date when it can be brought to an end. The provisions relating to the serving of such notices are normally clear. The lease will often state the requirement for how far in advance the landlord must be notified of the tenant’s decision to exercise the break. The doctrine of “time is of the essence’ is applicable in this respect which means that if the tenant misses the relevant date then the break will not be valid.
Upon whom should the break notice be served?
It is important to ensure that the break notice is served upon the current landlord. The Land Registry provides a useful search tool in this respect. The landlord named in the lease may not be the current landlord. If the Landlord is listed as a company then the Companies House website provides a similarly useful tool. As stated above, the landlord is under no duty to notify a tenant of a defective break.
What conditions need to be satisfied?
Each lease is worded differently so the tenant will need to carefully consider the particular lease under which he is bound. Payment of rent must be considered. This means that if the break date coincides with a rent payment date then the rent must be paid. If the break date falls in the middle of a quarter then the rent must be paid up in full. Paying on a pro rata basis is unacceptable unless the lease specifically caters for this.
Payment of all other monies under the lease such as service charges, insurance payments and other historic debts may also have to be paid in full by the tenant. The break itself may also be conditional upon a sum of money which must be paid. Any fixtures, chattels and sub-tenants must be removed from the property in order to fully comply with the requirement for vacant possession.
There may also be a requirement to comply with the repairing and redecoration covenants in the lease. A failure to comply with such covenants, even on a seemingly minor basis, can lead to the exercise of the break notice failing.
Here at Farleys we provide advice to both landlords and tenants on a daily basis in relation to the above issues. It is important to obtain legal advice prior to exercising a break notice in order to ensure that consideration has been given to the provisions of the particular lease in question.
The summary above is a general guide and should not be relied on as each break clause is different – if you are looking to exercise a break clause it is vitally important that you obtain legal advice before doing so.
Do not hesitate to contact us today in order to speak with a specialist commercial property solicitor who will be able to advise you on in relation to your lease specifically, highlighting any potential legal implications you may wish to consider.
By Ian Liddle, Commercial Property Solicitor, Manchester