Break clauses in Your Business Lease – What to do?
April 7, 2014

Marsons Solicitors have specialist property solicitors who advise on all types of commercial leases.

A break clause allows either the tenant or landlord to terminate the lease early. A break clause may only be exercised if any conditions attached to it have been satisfied. A break clause will be strictly construed by the courts and any conditions must be strictly performed. Get it wrong and it could be very costly to your business. These issues can become complicated so get advice before you serve notice so you are sure you are complying with the lease.

As property solicitors our advice on the Practical issues for tenants are:

• Once a break notice has been served, it cannot be withdrawn unilaterally, so a tenant must be sure that they intend to break the lease.

• Serve the break notice in good time and strictly in accordance with the terms of the lease.

• Keep evidence of the method of posting or delivery of the notice. If there are no service provisions in the lease, the tenant could request that the landlord acknowledges receipt.

• Pay any outstanding sums due, even if these are in dispute. Payment can be made on a “without prejudice” basis and the matter disputed later.

• Check whether default interest may be due on past arrears. If it is not known how much default interest is due, tenants should try to estimate the amount due and err on the safe side. The cost of doing so is likely to be far less than the cost of remaining bound under the lease.

• Ask the landlord for confirmation of the steps required to comply with any conditions. Ask the landlord to prepare a schedule of dilapidations in relation to any repair works. A schedule of dilapidations is a list of items that are in need of repair and that the tenant has responsibility for, due to the repairing obligations under a lease.

• If a tenant agrees to carry out works to the property before the break date, be careful to ensure that the works are completed and vacant possession is given by the break date.

• Consider asking the landlord to accept the break notice on payment of an agreed amount as liquidated damages for any outstanding breaches of covenant.

• Ensure that any waiver of a condition by the landlord is not made “without prejudice” and that it is clear to which condition(s) the waiver applies.

Please contact Jennifer White, commercial solicitor at our office in Bromley on 020 8313 1300 or jennifer.white@marsons.co.uk for further advice

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