Leases: Break clauses according to property lawyers

Beware of the Break Clause

Our team of property lawyers say that it is not uncommon for a lease of commercial property to contain a break clause in favour of the tenant.

It is, however essential that any tenant with the benefit of a break clause is able to exercise it, otherwise the tenant may be left paying the rent for a property that they no longer want for the full term of the lease.

It is often the case that break clauses are conditional upon the tenant having paid the rents reserved by the lease (not just the annual rent, but insurance rent and service charge), the tenant having observed and performed the tenant’s covenants of the lease (including redecoration) and leaving behind no continuing sub tenants.

Such conditions can be a minefield for a tenant as the Courts will strictly construe a break clause and any conditions attached to it. If the conditions of the break clause are not fulfilled, the break notice will be invalid and the lease will  continue until expiry.

The Code for Leasing Business Premises in England and Wales 2007 (“the Code”) recommends that the only pre-conditions to tenants exercising any break clause should be that they are up to date with the main rent, give up occupation and leave behind no continuing sub-leases. Disputes about the state of the premises, or what has been left behind or removed should be settled later, like with a normal lease expiry.

Compliance with the Code is not compulsory when a lease is being prepared. The best protection for a tenant is to ensure that the wording of the break clause complies with the Code. If it is not possible to agree such wording the tenant should take great care when exercising a break clause to ensure that any conditions within the clause are met.

Ideally, expert legal advice from property lawyers should be sought.

For further help from one of our property lawyers please call or email Gary Burns on 0161 624 6811 / gb@wrigleyclaydon.com.

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John Porter

John has been with Wrigley Claydon for over 20 years, becoming a partner in 1995. Specialising in Employment Law, John helps clients with matters including the preparation of recruitment policies and employment contracts as well as advocating in employment tribunals in cases of unfair dismissal or discrimination. He also has considerable experience of dealing with landlord and tenant disputes and matters relating to business and company sales, commercial investment property transactions and lettings as well as residential estate and offshore property developments. “I know I’ve done a good job when the business doesn’t need me!” John is never happier than when spending time with his wife and 2 children, Lucy and Alex. John is Chair of Respect Our Community Awards (ROCA) and a board member of First Choice Homes Oldham. In his spare time, John is likely to be found either reading, cooking or walking Donnie the Golden Retriever.

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