To break or not to break?

It is commonplace to find Landlord biased pre-conditions attached to break rights in commercial leases notwithstanding that the Code for Leasing Business Premises recommends that the only pre-conditions to tenants exercising any break clauses should be that they are up to date with the main rent, that they give up occupation and that they leave behind no continuing subleases.

Care should be taken by any Tenant looking to exercise a break right as it is imperative that if there are any preconditions they are strictly complied with. If they are not, the purported exercise of the break right may be invalid.

There have been a number of cases, the results of which on the face of it seem unfair to Tenants, where the service of the break notice has been found invalid because the pre-conditions to the break right have not been strictly complied with.

In the case of Avocet Industrial Estates LLP v Merol Ltd & Another, a tenant found itself on the hook for over £300,000 rent as a result of a failure to pay interest on late payments amounting to a mere £130. This case is a cautionary tale for tenants wanting to excercise break clauses. A thorough review of the lease must be made to ensure that all pre-conditions have been met. Break clauses will be interpreted strictly by the Courts and if the wording of a lease requires that a sum be paid, tenants must ensure that they discharge their liabilities so as not to find themselves committed to continuing an undesirable tenancy on account of a trivial debt.

If you would like to discuss this in more detail, without obligation, please contact our commercial property team on 01283 526 200.

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