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What is a Break Clause and Who Can Exercise Them?
Commercial property leases come with their fair share of complexities, and one crucial aspect that often requires special attention is the “break clause”. Whether you are a tenant looking for an early escape route or a landlord aiming to regain control of your property, understanding break clauses is essential.
Maria Khan, Paralegal in WSP Solicitors Commercial Property Department, explores break clauses further.
Break clauses can provide either or both parties, with the option to end a lease at specified times, under certain conditions. For instance, tenants may have the option to terminate a 15-year lease at the 5th or 10th year, or if they provide an agreed notice to the Landlord. Similarly, landlords may have the option to end the lease early if they intend to redevelop the premises or use them for their own business purposes.
Conditions for Exercising Break Clauses
To successfully exercise a break clause, it’s crucial to adhere strictly to its terms. This includes the correct timing and manner of exercising the clause. Some break clauses may have preconditions, which must be strictly met. For example, some clauses might require vacant possession, meaning all partitions and installations must be removed, as illustrated in Riverside Park Limited v NHS Property Services Limited 2016.
Preconditions and Tenant Compliance
Tenants should be cautious about lease provisions that make compliance with tenant covenants a precondition for exercising the break clause. Even minor breaches of covenant can invalidate the option.
Dealing with Rent Payments
Tenants should be aware of the rent payment schedule in relation to the break date. If the break date falls between rent payment dates, the tenant must pay the full quarterly rent on the scheduled date, even if they won’t occupy the premises for the entire quarter.
Compliance with Notice Requirements
It’s essential to strictly adhere to any notice requirements when exercising a break clause. Time is typically of the essence in a break clause unless otherwise specified in the lease. In cases where a mistake is made in the break notice, the court may still validate it if the error is reasonably evident to a knowledgeable recipient.
For more information and specific legal advice on break clauses or any other commercial property matter please contact us using the form found here or on the side of this page. Alternatively, you can call us on 01453 847200.