It’s good to be back! After about two years of various levels of lock-down we can now continue sharing the latest legal developments for the better awareness of the general public. Of course, in the meantime, we hope we have retained the interest of our familiar readers.
This month we have looked at Break Clauses in commercial leases. In times of financial and commercial uncertainty a break clause is really important from the point of view of a tenant, especially one that is starting up a new business, or moving to larger premises. Typically a landlord will be seeking as long a lease term as the market will stand. Sometimes this might even be longer that the seven years that would require registration at HM Land Registry.
Supposing the lease is fixed at seven years exactly, so no registration is necessary. The nervous tenant might want the facility of terminating the lease after, say, three years, especially if this coincides with a rent review which he feels he can’t quite afford. How, then, to break the lease? The tenant has to be punctiliously careful over this – and start by reading the particular clause in the lease to find out what, precisely, must be done. Usually it will require a Notice of break to be served. Be sure that it is served BY the correct person(s), ON the correct persons, for the correct period, and ending on the correct date.
The clause usually requires all due rent to be paid. This means that if the lease provides for quarterly rent payments on the usual quarter days, and tenant is trying to break his lease by giving six months notice to expire on, say, 30th June, he must first have paid the full quarter’s rent on 24th June even though he was vastly overpaying the likely due amount.
And he must be sure to have fully repaired the property in accordance with the relevant clause. No cracked window panes, or toilets that don’t properly flush. And when he vacates he must take everything with him that he brought in. Beware of taking things that belong to the Landlord as this, too would be a default.
If he had been permitted to carry out alterations he must check whether he has to reinstate the original, and all works must probably be done BEFORE the due break date.
A break clause is a very valuable feature for the tenant, but if he gets it wrong he’s still liable for the rent for the rest of the lease.
For more advice about leases and break clauses contact John Pulham at:-
Messrs Pulham & Co