A break clause is included in most commercial property leases. It can enable the landlord or the tenant (or both of them) to end the lease before the end of the contractual term.
There are many reasons why either party may wish to ‘break’ the lease – financial difficulty, growth, relocation to a different market – the list is endless.
Whatever the reason, it is important to follow the requirements set out in your lease to the letter. More often than not your lease will set out precisely what needs to be done, and how, in order for a break to be valid. There may even be conditions attached.
The first job, whether you are receiving or giving notice, is to read your lease carefully. It should state:
- when the break can be exercised – whether it be a specific date or after a certain period of time;
- how much notice is needed; and
- whether there are any conditions which need to be met for the break to be valid. For example, do rents need to be up-to-date, is material or reasonable compliance a condition, is vacant possession required?
Secondly, it will specify what form the notice should take, how it is to be sent and who it is to be sent to. If the lease is silent on a particular point, statute and case law will hold the answer.
While a minor error in the content of the break notice itself might be tolerated, a non-compliant notice or a notice not served in accordance with the strict letter of the lease will be invalid.
For many, whether a landlord or tenant, an invalid break could be disastrous, causing the best laid plans to be put on hold, or it could be a saving grace.
It is always advisable to use a solicitor to draft your break notice. Your solicitor will advise you on any pre-conditions to a valid break and serve your notice to ensure validity.
Likewise, if you are on the receiving end of a break notice, a solicitor’s review of a break notice served on you may save you the hassle of finding a new tenant or new premises.
In this blog series we will look at particular issues with break clauses. Look out for our next blog, which will look at ‘Rents’ including what they are and why they may invalidate a break.
If you need advice about how to exercise a break clause in a commercial lease or to check the validity of a break notice served on you, call 01782 205000 or email email@example.com