19 March 2015
What Is A Tenant’s Break Clause?
Does it mean that I can end my business lease immediately?
Answer: A break clause (sometimes referred to as a break option) is a term in a lease which allows a tenant to terminate their lease early - before the lease expiry date - but at a specified time, not immediately, and, usually subject to certain conditions. The lease will provide that the break is exercised by a notice to the landlord. The specified time and the notice period must be checked. All looks quite straightforward. No need to get lawyers or surveyors involved!
Warning: Exercising a break clause can be fraught with difficulties and traps for the unwary.
In the world in which we live, sadly, nothing is as simple as it may first appear. If you do get it wrong, it could cost a lot of money. Just imagine: you have served your break notice, and you are sure you have covered all the conditions. You have committed to new Commercial Premises, and are all set to move, when your landlord mentions that your break notice is not valid. By then, it is too late to put things right. Now you have two leases and cannot get out of either of them.
Horror stories to make you sit up and think:
- Notice served a day late: no good, time limits are absolute.
- Notice sent to the wrong place: you sent it to the address you always use for your landlord, but the lease required the notice to be sent to a different address.
- There is a condition that you must pay “all rent due” up to the break date: under the strict terms of the lease some interest was due. “Rent” is defined as including “all sums due to the landlord”, and although the landlord never asked for it, you did not pay it, so the condition has not been complied with, and the break does not operate.
And there are many, many, more.
How to get it right: hopefully, every time!
1. Check your lease as a priority - know what your clause requires at the right times.
2. If there is a tenant’s break - get legal and surveyor’s advice sooner rather than later. Do not leave it to the last minute. You may just save yourself a lot of money. Golden rule: if in doubt, check it out.
Mistakes are inevitable
Everybody makes mistakes. Some mistakes are fatal which mean that the break will be lost and the lease will continue; some are not. If you think you have made a mistake you should seek legal advice as quickly as possible to see if the situation can be rectified. Alternatively, it may be possible to do a deal which, though potentially painful, is better than on-going liability. The longer you delay, the worse matters may become.
Slater and Gordon Lawyers are experts in commercial property law and are available for any help or advice you may need. You can contact us on freephone 0800 916 9083 or contact us online and we will call you back.
Slater and Gordon Lawyers have more than 1,450 staff and 18 offices in London, Manchester, Liverpool, Birmingham, Sheffield, Milton Keynes, Bristol, Derby, Merseyside, Cambridge, Edinburgh, Cardiff, Halifax, Newcastle, Wakefield and meeting rooms in Bramhall, Cheshire and in Hull, Yorkshire.
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