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Commercial Leases: Break Clauses

break clauses

Issues can arise during the term of a lease leaving a landlord or tenant looking for an early break. A well-drafted commercial lease will include a break clause – a provision allowing the parties to agree an early termination.

Is it that easy?

Absolutely not – if you are a tenant hoping to vacate the premises before the end of a term, contact our commercial property department as soon as possible to avoid:

  • breaching the terms of the lease;
  • failing to follow the conditions of service of a break notice; or
  • failing to meet strict deadlines.

Breaching the terms of the lease: What could go wrong?

The break clause will impose conditions on the tenant such as:

  • paying the rent in full (and all other payments that may be due under the lease);
  • performance of the tenant’s covenants (such as covenants to repair and to keep the premises in good condition); and
  • fully vacating the premises.

Conditions that require Vacant Possession:  Vacant possession means vacant possession.

  • On or before the break date, the tenant must have vacated the premises and removed ALL EQUIPMENT other than the landlord’s fixtures.
  • Don’t leave anything behind – leaving CCTV or curtains could render the break void.

Breach of dilapidation clauses:

  • If the premises is in need of repairs, the landlord could make a dilapidations claim against the tenant.
  • The landlord may require the tenant to reinstate the premises to its state immediately before the parties entered the lease (i.e. undoing any alterations that the tenant may have made).

Timing and Service

Be wary of timing:

  • If the break clause includes a rolling break – it can be terminated at any time.
  • The break may be exercisable after a specified date – the tenant will have a minimum period of tenancy before the break becomes exercisable.
  • The break clause may be on an agreed date or fixed date – fixed dates may be linked to a rent review so that the tenant can break if they do not want to pay increased rent.
  • If the tenant makes a timing error, a new break notice will need to be served and the tenant will be liable to pay rent and other costs incurred in the meantime.

Service:

The conditions of service will be set out in the lease and must be followed diligently. Be wary of:

  • the acceptable address – it can be difficult to establish the correct address; and
  • method of service – the notice may need to be hand delivered/delivered by email or by recorded delivery.

 

Whether you’re developing, purchasing, selling or leasing commercial premises, you can be sure to receive a personal, high-quality service from our Commercial Property team.

Contact our head of property, James Pearn for a no-obligation quotation or discussion:

Email: property@loosemores.co.uk

Phone: 029 2022 4433

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