Commercial Property

Break Clauses in Leases – What do they do?

In leases, break clauses serve as crucial provisions that can provide flexibility for both landlords and tenants.

29 Aug 2023

A break clause can be in favour of the landlord, the tenant or both landlord and tenant and allow the benefitting party to terminate the lease before the expiration of the fixed term, subject to certain conditions and notice requirements being met.

Break clauses are regulated by specific laws and have implications that both parties should carefully consider. This article aims to shed light on the key aspects of break clauses in leases, outlining their effects, considerations for landlords and tenants, and the importance of seeking legal advice when exercising them. Break clauses can be included in both residential and commercial leases, but this article will primarily focus on commercial leases.

What is a break clause?

A break clause is a contractual provision that grants one or both parties the right to terminate a lease prematurely. It acts as an escape route, allowing parties to exit a lease early, providing flexibility in an ever-changing business environment. It impacts all parties, so it is important that both landlords and tenants have an understanding of them. The points for each party to consider differ slightly in detail and are outlined below.

Conditions

Break clauses are typically subject to specific conditions, especially for the tenant, such as the provision of a specific period of notice and means of serving such notice, payment of outstanding rent, compliance with repair obligations, or the giving of vacant possession of the property.

Points for Landlords to Consider

For landlords, it is vital to carefully draft break clauses to ensure they protect their interests. Ambiguous or poorly worded clauses can lead to disputes and uncertainty. Seeking legal advice when drafting a break clause can help landlords avoid potential pitfalls.

Notice Periods

Break clauses usually require the serving of a notice by the party wishing to terminate the lease. The notice period can vary, but it is crucial for landlords to clearly specify the required length of notice in the lease.

Points for Tenants to Consider

Tenants must thoroughly review the conditions associated with the break clause. These conditions may include obligations such as reinstatement of alterations, payment of outstanding sums, or compliance with repairing obligations. Failure to fulfil these conditions can lead to the break clause being invalidated which may result in a tenant missing the break date and being unable to terminate the lease early.

Timing and Flexibility

Break clauses provide tenants with the opportunity to reassess their business needs and exit a lease if necessary. However, tenants should be cautious about the timing of exercising the break clause. It is essential to consider market conditions, relocation logistics, and the impact on the business before deciding to terminate the lease whilst similarly ensuring that they comply with the requisite notice period.

Notice Periods

As with landlords, tenants must carefully adhere to the notice requirements specified in the lease. Failure to serve the notice within the specified timeframe could result in the continuation of the lease and the tenant will have to fulfil their obligations for the remaining lease term.

Seeking Legal Advice

Exercising a break clause can have significant implications for both landlords and tenants. Due to the complexity and potential risks involved, it is strongly recommended that the parties seek professional legal advice before taking any action. An experienced solicitor with expertise in property law can review the lease, clarify obligations, and guide clients through the process, ensuring compliance with legal requirements and safeguarding their interests.

M&P Commentary

Sophie Williamson, a specialist in Commercial Property law, said:

“Although more modern leases are generally moving in the right direction by providing break clauses which are easier to comply with, we are still seeing leases which have been recently granted with break conditions which are difficult (or sometimes impossible) to satisfy. In addition, it is not uncommon for a tenant to be convinced they have satisfied their break condition only to find out on their break date that they have fallen into one of the common traps, for example, by apportioning their rent so that they only pay rent due up to the break date or by not leaving enough time for service of the notice or not serving the notice correctly.”

OUR CLIENTS SAY ABOUT US

Ranked highly in Romford and Brentwood for solicitor firms

Family
The service I received from Allison was exceptional. Always highly professional and informative.
Virginia
Wills
Mullis and Peake are very efficient, professional and friendly company to deal with. Excellent service throughout.
Brian
Employment
Excellent, swift service from Esther at Mullis & Peake. Showed clear expertise in her field & walked me through everything patiently & thoroughly.
Dan
Company and Commercial
I found the service provided was excellent from start to finish, with our requirements met in a timely manner throughout.
Gary
Wills
Staff very helpful and friendly. Trudi was easy to talk to and to understand the procedure.
Pamela
Dispute resolution
We contacted Martyn to deal with a sensitive Will dispute and we can’t thank him enough for his commitment and hard work.
Salena
Residential Property
Very prompt. Experienced. Expert. Friendly.
Trevor
Commercial Property
Excellent service and far quicker than previous negotiations using a different solicitor.
John
Family
At all times I was kept informed about the progress of the case and everything was completed in a timely fashion.
Melanie
Personal Injury
Martyn undertook and guided me through the lengthy process [of a personal injury case], and after much work, achieved a successful result.
Shirley

Related News insights

Legal, Wills & Power of Attorney
10 Myths about Wills and Probate
Court of Protection, Legal
Probate Service in Crisis
Employment Advice, Legal
What Does a Labour Government Mean For Employment Law?
Charity & Fundraising, Mullis & Peake
LawNet Challenge 2024 – Completed!