Commercial Lease – Break Clause

A Break Clause is a provision contained in a Commercial Lease which provides the tenant or landlord or sometimes both with the ability to terminate the contractual lease term.  Often in order for a party to serve a break notice the nature and mechanics of the provision must be examined in order that the party has the ability to action the provision.

To clarify often a break notice might state that in order for a tenant to action a break clause, the property must be given to the landlord with vacant possession, all monies owing pursuant to the terms of the lease are up to date and paid and the tenant has materially complied with the lease.  Often Break Clauses are far more complex than this, however taking this example:

“the property must be given to the landlord with vacant possession” – Are the premises ready for occupation immediately by another tenant?    Has the tenant inadvertently granted statutory right to a sub-tenant?

“all monies owing pursuant to the terms of the lease are up to date and paid” – Does the date specified within the break clause fall in the middle of a quarter, therefore does the tenant have to pay a full quarters rent to fullfill this requirement or can the rent be apportioned up to the date specified in the break notice?  Is the service charge or any other monies owed paid to the landlord?

“the tenant has materially complied with the lease” – What if the lease states the tenant has to yield up the premises and repaint the property with three coats of paint every 3 years and the tenant has only painted the property every 5 years with one coat of paint?  Has the tenant breached the authorised use provision contained in the lease?

These are just a sample of questions which tenants must consider when deciding whether they wish to or indeed are able to action a Break Clause. To make matters worse for tenants, landlords fears over having empty commercial properties in the current economic climate is causing landlords to take specialist advise to see whether they can invalidate tenants break options.

Contrastingly if a landlord wants to serve a break notice within a lease which is contracted into the security of tenure provisions of the Landlord and Tenant Act 1954.  The landlords break notice will only bring the contractual term to an end.  The tenant will then have the right to stay in the property by virtue of section 24 of the Landlord and Tenant Act 1954 until such time as the tenant decides they wish to vacate or the landlord serves a further notice called a section 25 notice.

For further information please go to:

http://www.legislation.gov.uk