BREAK CLAUSES: A TRAP FOR THE UNWARY TENANT

Tenants of commercial Leases must be extremely careful when exercising a break option under their Lease.

Quite often the break clause in the Lease is drafted heavily in favour of the landlord and the break clause itself is conditional on certain events happening.  The landlord may well want to keep tenants on the hook and, for the unwary tenant, will use the drafting in the break clause as a trap to prevent the tenant from terminating the Lease

Whilst there are exceptions, the Courts generally operate a strict approach to interpretation and implementation of break clauses.  If the tenant fails to adhere to the strict conditions unwittingly, they could miss the break option leaving them stuck with a building they no longer wish to use.  This can be extremely costly.

It is, therefore, very important for tenants to:

1. Diarise a reminder well in advance of the break date. Most leases state that the Tenant must provide at least six months written notice. These dates are often missed and the ability to break the Lease is then lost.
2. Instruct a solicitor when agreeing the Lease in the first place so the break clause is adequately drafted from a tenant’s point of view and they do not fall foul of an unscrupulous landlord seeking to use the break clause as a trap.
3. Speak to a solicitor well in advance of exercising a break clause to ensure effective and correct service of the break notice on the landlord.

If you have any queries on this article please contact Neil Belcher on 01242 586352 or nb@hughes-paddison.co.uk