What is a break clause?

  • A break clause is often included in a lease, allowing either the tenant or landlord to terminate the lease early.
  • Exercising a break clause brings the lease to an end. However, where the landlord breaks the lease, legislation is in place that may allow the tenant to remain in the property after the lease has ended.
  • Depending on how the lease has been drafted, the right to break the lease may:

arise on one or more specified dates; or
be exercisable at any time during the term of the lease on a rolling basis.

  • A break clause can only be validly exercised if any conditions attached to it have been satisfied. A break clause will be strictly construed by the courts and any conditions must be strictly performed. Therefore it is extremely important to make sure that the break is validly exercised.

Practical issues for tenants to consider when exercising a break clause

  • Once a break notice has been served, it cannot be withdrawn unilaterally, so a tenant must be sure that it intends to break the lease.
  • Tenants should comply with all the relevant requirements in the break clause and keep evidence of their compliance.
  •  Serve the break notice in good time and strictly in accordance with the terms of the lease.
  • Keep evidence of the method of posting or delivery of the notice. If there are no service provisions in the lease, it is a good idea to request that the landlord acknowledges receipt.
  • If the notice is being served by an agent, make sure the landlord is aware of the existence of the agency and the authority of the agent.
  • Consider carrying out a compliance audit with a surveyor's advice before serving the break notice. A tenant can then take steps to remedy any breaches.
  • Pay any outstanding sums due, even if these are in dispute. Payment can be made on a "without prejudice" basis and the matter disputed later.
  • Check whether default interest may be due on past arrears.
  • Ask the landlord for confirmation of the steps required to comply with any conditions. Ask the landlord to prepare a schedule of dilapidations in relation to any repair works.
  • If a tenant agrees to carry out works to the property before the break date, be careful to ensure that the works are completed and vacant possession is given by the break date.
  • Consider asking the landlord to accept the break notice on payment of an agreed amount as liquidated damages for any outstanding breaches of covenant.
  • Ensure that any waiver of a condition by the landlord is not made "without prejudice" and that it is clear to which condition(s) the waiver applies.
  • Remember that it is often worth seeking legal advice on the exercise of the break and its consequences, in order to avoid any pitfalls!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.