30 July, 2019
A break clause is a term in a lease which allows a party (usually the tenant) to end the lease earlier than the contractual end date.
The advantage to a tenant is that if they are unsure about the profitability of the business at that location, they can vacate sooner and reduce their liability for rent and other outgoings.
A break clause usually comes at the price of an increased rent, since the disadvantage to a landlord is the uncertain future of its income stream.
Break clauses stipulate what period of notice is required to break a lease, and how the notice must be served.
Almost all break clauses contain conditions.
A break notice is a notice served on the landlord to exercise the break at some point in the future - usually 6 or 12 months.
It cannot be revoked and must be served in accordance with the lease. The courts have made it abundantly clear that a tenant wishing to break their lease early must adhere strictly to the terms of the break clause when serving their notice.
The break clause will stipulate what conditions must be met for the break to become effective on the break date.
The most common conditions are that the tenant must give vacant possession (or leave occupation with no subsisting sub-tenancies) and pay all rent and other outgoings to date.
Some break clauses stipulate a payment to the landlord in the event that tenant exercises the break, often due before the break date.
If the tenant does not serve the break notice correctly, or fails to comply with a condition or penalty, the lease will continue and all liabilities under the lease will remain.
For more information contact Laura Hallett Lea in our Business Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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