UK: Break clauses - material compliance with tenant’s covenants as a pre-condition

Last Updated: 26 January 2006
Article by Caroline Potter

Where a tenant’s option to determine its lease is conditional upon material compliance with its covenants in the lease does this mean that any disrepair in the premises will deprive the tenant of his right to break? This was the issue that was recently discussed in the High Court in Fitzroy House Epworth Street (No. 1) -v- The Financial Times [2005] EWHC 2391 (TCC). The court held that if the breaches are minor, the tenant will still be in a position to exercise the clause.

Tenant break clauses have become increasingly common in leases over recent years. They have also become a regular source of dispute between landlord and tenant usually because the landlord does not want his tenant to leave, either because the tenant is currently paying a higher than market rent or because the landlord foresees difficulty in reletting the premises. Care must therefore be taken by the tenant in following the precise conditions of the break clause as regards the service of the break notice and the fulfilment of any pre-conditions.

Historically, break clauses were drafted so that the tenant could only exercise the break if he was in strict compliance with the terms of the lease including the payment of rent and any repairing or decorating covenants. Tenants became alert to the problems that strict compliance brought and started to delete these pre-conditions. Often as a compromise tenants and landlords agreed that "material compliance" or "substantial compliance" with the tenant’s covenants was all that was required.

What does material compliance with the tenant’s covenants actually mean in this context? This has been considered in the recent High Court decision of Fitzroy House Epworth Street (No. 1) -v- The Financial Times [2005] EWHC 2391 (TCC).

The lease provided a right to break that allowed the FT, as tenant, to determine the lease on serving at least 13 months notice before the relevant termination date of 1st April 2004. The lease would only be determined if the FT had materially complied with all its obligations under the lease up to the date of determination. The FT served the appropriate notice to break and then undertook substantial repairs and renovations costing in the region of £1million. They vacated the premises on the 1st April 2004.

Prior to carrying out the extensive programme of repairs, the FT’s surveyor made reasonable efforts to meet the landlord in order to agree upon the works needed to ensure that the FT were in compliance with all its repairing obligations. The FT’s specification of works was sent to the landlord for comment but none was forthcoming. The landlord prepared its own specification but did not give this to the FT until after the break date had passed.

The landlord, Fitzroy, argued that the tenant was in breach of the repairing covenants and that the lease was not broken and remained in existence. Fitzroy argued that material compliance was to be narrowly construed so as only to apply to trivial breaches. Much was at stake as if the FT failed to terminate the lease, it was liable for a further six year’s of rent payments at the rate of £600,000 per annum.

The basic principle set out in the 2001 case of Commercial Union Life Assurance Co Ltd -v- Label Ink Ltd L & TR 29 is that a breach is material if, but only if, having regard to all the circumstances, and to the proper efforts of the tenant to comply with his covenants, as well as the adverse effect on the landlord of any failure to do so, it would be fair and reasonable to refuse the tenant the privilege that the lease otherwise grants.

The repairing obligation in the lease required the FT to put and keep the premises in repair. The court ruled that not every defect, however minor, had to be put and kept in repair. The obligation is to put and keep the premises in substantial repair. Minor defects would not be included in that obligation. A breach of the repair obligation would only be material if the landlord’s legitimate interests are jeopardised by the breach. The landlord’s interest in ensuring compliance with the tenant’s obligations before the tenant departs is in order for it to be able to relet the premises quickly and thereby preserving its income stream. The court concluded that the FT had materially complied with all its obligations and was therefore entitled to break the lease on 1st April 2004.

Rights to break may require the tenant fully to comply with its obligations. Faced with a covenant in that form, the court may have been unable to ignore minor defects and the tenant would have lost his right to break the lease. Where the obligation is materially to comply, the court was entitled to be more lenient. The outstanding defects in the property had no effect on Fitzroy’s ability to obtain a further tenant, nor on any terms it could reasonably expect to negotiate. The limited nature of the remaining breaches meant that the damage to the reversion was negligible or nil.

Break clauses that qualify their exercise by "substantial compliance" with or "reasonable performance" of the tenant’s covenants are to be avoided because of the potential for uncertainty and dispute. Although this case shows that the court was willing to ignore relatively minor breaches of the repairing covenant the landlord has been given leave to appeal. It would a safer course for any tenant to insist on a break clause that contained either no pre-conditions or merely a requirement that the rent has been paid.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 25/01/2006.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions