A break clause allows you to terminate a lease before the expiry of the contractual term. To ensure the break is exercised in the correct manner, the break notice must be served in compliance with the lease terms. A break notice in a lease is a notice which either or sometimes both a landlord or tenant can serve on the other to terminate the lease. There may also be conditions to the break clause that must be complied with.
Is there a fixed or rolling break date?
A break clause can be drafted in different ways. There may be a fixed date or dates by which to operate the break. The alternative way to draft the clause is to make it so the clause could be exercised at any point by providing a given period of notice. This is referred to as a “rolling” break right.
How can I exercise the right?
To exercise the break, you will need to serve a notice to the landlord in accordance with the terms of the lease. If you are a landlord and you have the right to exercise the break you will need to serve notice to the tenant. It is imperative that the correct notice period is given and the notice provisions in the lease are complied with. The provisions will often specify the entity to be served and the address to which the notice should be sent to.
Are there any conditions that I need to comply with?
Sometimes there are conditions that need to be complied with in order to ensure that the break clause is exercised effectively. These may include the following:
- Payment of sums under the lease. This can include rent, service charge and insurance rent, amongst other sums under the lease. Unless the lease otherwise, all sums due must be paid, even if they relate to a period after the break date. By way of example, if the break date falls between two rent payment dates, the previous quarter must be paid in full.
- Some leases contain a provision that requires the landlord to refund any sums paid for the period after the break.
- Provide vacant possession. However, this can be more onerous than simply giving up occupation, therefore it is important to check the wording of the clause.
- A requirement that all the covenants under the lease have been complied with. This can be a particularly onerous condition as it may require the tenant to comply with covenants such as those relating to repair and maintenance before the break clause is exercised.
If the break conditions are not complied with, the break right will not take effect, and the lease will continue for the remainder of the term (unless the landlord waives compliance with the break conditions).
If you’re thinking of letting your property or you are looking to enter into a commercial lease, please contact us for straight forward, jargon-free legal advice.