When is a break not a break? Understanding your business premises lease
Business premises leases can include a break clause that allows tenant or landlord to end the lease early — but beware: if the law is not followed to the letter, the break clause may not be worth the paper it is written on.
Break clauses can be useful for tenants who want to step out of their lease early for any reason or for landlords requiring their premises to be vacated earlier than expected, but they should be treated with care.
The UK courts have repeatedly shown that they will interpret such clauses very strictly so, if any relevant conditions have not been satisfied, the right to break the lease contract could be lost. If, for example, the clause requires a tenant to give vacant possession at a certain date yet the tenant remains in the property or leaves any equipment behind after vacating, the break clause is likely to be invalidated and the full lease will remain in force.
Consulting a legal professional to advise on matters pertaining to business premises leases is always a good idea – in the meantime, our practical tips could help you avoid some of the most common pitfalls.
• Remember that, once served, a notice exercising the break clause cannot be withdrawn — in most cases there’s no going back.
• Make sure you comply with all the conditions relevant to the break clause and keep a full record to show as evidence if necessary.
• Serve the break clause notice in good time and strictly in accordance with the terms of the lease, and keep a full record of every step you take.
• A break clause must be exercised by all tenants included on the lease so make sure each tenant is in agreement and serves notice appropriately.
• A tenant may be liable for payment of all outstanding sums due under the full lease, so it is best to check your break clause responsibilities in advance.
• If a tenant has agreed to carry out works before the break date, these should be completed in good time and vacant possession given promptly.
• Remember to comply in advance with any general obligations that apply at the end of the lease such as the removal of signage, reinstatement, repairs and/or redecoration of the property.
If you would like advice on any of these points or support with any aspect of business or property law, contact George Ide LLP’s experienced legal professionals who will be pleased to help.
Robert Enticott. Partner & Head of Business ServicesBusiness, Commercial Property, General, George Ide, News