Break Clauses

By Sue Boyall – Chamber Legal Forum Member

Breaking up can be hard to do

Another recent case on break clauses has once again highlighted the need for tenants to follow the requirements of their leases to the letter when seeking to exercise a break. In Friends Life Ltd v Siemens Hearing Instruments Ltd, the break failed as it had not included certain wording that was specified in the lease.
A break clause in a fixed-term lease allows either the tenant or landlord to terminate the lease early.
Some break clauses may only be exercised if conditions attached to them have been satisfied (e.g. providing vacant possession or paying all monies due). In such cases any conditions must be strictly performed. Failure to do so may invalidate the break.
Tenants of commercial leases should note:
Once a break notice has been served it cannot be withdrawn, so they must be absolutely sure they wish to terminate the lease.
They should keep evidence of compliance with the break clause requirements.
Notices must be served in good time and strictly in accordance with the lease terms.
Evidence should be kept of the method of posting/ delivery.
If the notice is being served by an agent, this should be made clear to the landlord.
For a conditional break clause, they should check whether there are any breaches or sums due (including default interest) so that breaches can be remedied. Outstanding sums can be paid even if these are in dispute (payment can be made on a “without prejudice” basis and matters disputed later). Tenants might consider asking the landlord what needs to be done to comply with any conditions.
If a tenant agrees to carry out works, these should be completed and vacant possession given by the break date.
A tenant could ask a landlord to accept a break notice on payment of an agreed compensation figure for any breaches.
If a Landlord waives a condition, the tenant should ensure that the waiver is not made “without prejudice” and that it is clear to which condition(s) the waiver applies.
Advice should be sought in good time in order that expensive mistakes are not made.