“More and more commercial tenants nowadays, given the economic uncertainty of our times, ask the landlord to insert a break clause in their leases so that the tenant can terminate the lease early if the new venture turns out to be less successful than hoped for.
However in a difficult market, landlords are reluctant to lose a tenant who has a good payment record and may find any excuse to hang on to reliable tenants. It is common for landlords to pick holes in tenants’ break notices in an attempt to keep them on the hook for rest of the lease. Typically the landlord will claim that the break notice was not validly served or it contains errors.
Break notices must be served properly and comply with the lease, otherwise the tenant loses the chance to break and must continue paying rent for the rest of the term.
The Court of Appeal confirmed this strict approach in a recent case. The tenant, Seimens Hearing Instruments Ltd, had served a break notice on its landlord, Friends Life Assurance Society Ltd (formerly Sun Life), to terminate its lease early. However the Court found that the notice did not comply exactly with the requirements of the lease. Seimens was therefore bound to continue with its lease until the end and must carry on paying its rent to Sun Life.
Not all leases contain break clauses but if yours does, whether you are a landlord or a tenant, great care must be taken over the drafting of the break notice and service on the landlord.
Don’t wait until the last minute but come and see us in good time before you make a decision to break the lease, if you are a tenant, or before you respond to a notice you have received, if you are a landlord.”
If you would like to discuss a break clause with us, please contact Mark Barrett on 01323 720142 or at firstname.lastname@example.org.