How to benefit from a break clause in your lease

A break clause in a fixed-term lease means the tenant or landlord can terminate the lease early.

Break clauses are especially useful for fast growing businesses whose accommodation needs expand as they hire more staff and need extra operating space.

Conversely, struggling or restructured businesses often have reduced space requirements. In these circumstances they can activate the break clause and locate to smaller premises, reducing overheads and boosting profitability.

What you need to know about breaking your lease

Triggering a break clause ends the lease – although if the landlord does this, legal protection for tenants means you may be allowed remain in the property after the lease has ended.

Depending on the terms of your lease, you could have the right to break it on one or more specified dates; or at any time on a rolling basis.

A break clause can only be activated if all conditions have been met, such as giving the landlord vacant possession.

Look very carefully before you leap

Once a break notice has been made you can’t withdraw it, so it’s important to make sure you have a well thought-out plan before going ahead. If you and the landlord jointly waive the notice, a new lease will be created, taking effect from the expiry of the break notice.

It’s essential that you keep documentary evidence that you have complied with the lease, and that you serve the break notice in line with the conditions.

Thinking ahead can save you time and trouble later

It’s worth getting a surveyor’s advice on a compliance audit before serving the break notice. In this way you can take steps to resolve any problems in advance and make sure you comply with all the covenants.

You should also pay any outstanding rent, even if there is a disagreement. Payment can be made ‘without prejudice’ which means you can sort out the disputed matter later.

Carrying out repairs early will ensure a smooth transition

Misunderstandings can be avoided by asking your landlord to confirm the steps you need to take to comply with any conditions. This might involve requesting a ‘schedule of dilapidations’ – a list of items you are responsible for repairing under the lease.

If you agree to carry out repairs before the break date, you should ensure that the work is completed and vacant possession is given by the break date.

If you would like to discuss this or any other commercial property matter, please contact Harrison Drury on 01772 258321.