Break Notices - Don't get caught out!

A break clause is basically an opportunity for landlord or tenant or both to bring the lease to an end at an earlier date than the contractual end date. There are no hard and fast rules as regards whether either the landlord or tenant can break the lease; it is down to negotiation.

All break clauses though have requirements for notice and how they are exercised. Some break clauses also have other conditions for them to be effective, and, for both landlords and tenants, they need to be acutely aware of what those requirements are and ensure that they are complied with to the letter.

By way of example, it is usual in a commercial lease for there to be a date on which the lease can be broken and for the tenant to give 6 months’ notice of the intent to break the lease.

It is usual for the notice to have to be given in writing and there are also usually provisions in a lease for how the notice is to be delivered to the landlord. Generally, that will involve posting by first class post or recorded delivery. If a break notice is being sent, these conditions must be complied with. If there is a 6 month notice requirement, then notice should be given in good time prior to 6 months before the break date to ensure that the recipient receives it at least 6 months before the break date. If the lease says that notices have to be delivered by post, then do not deliver them by email because the notice will not be valid.

If a condition requires the notice to be given on pink paper, then make sure the notice is given on pink paper. If the notice is given on blue paper, then it may not be valid.

There will probably be requirements on which address to send the notice to and that needs to be complied with strictly.

Serving a break notice is a very easy thing to get right but an even easier one to get wrong. There are many traps for the unwary and generally it is prudent to get legal advice.

There are often also requirements when you get to the break date, for example, most break clauses in leases require all rent and other charges to be paid up in full in order for the break to be effective. If the tenant were looking to break and decided not to pay the last month’s rent, then they could well find that the break is ineffective even if the notice was delivered in good time.

Sometimes there are other provisions requiring compliance with lease covenants and vacant possession being given. Whilst the latter is perhaps easier to comply with, ensuring compliance with covenants can be difficult and can effectively make operation of a break notice nigh on impossible. For example, if a tenant is required to keep the property in good repair and the tenant thinks that they have done that and the landlord then goes in after the tenant has vacated and decides that the property is not in ‘good repair’, and can substantiate that by way of evidence, the break notice would not be valid.

There are many cases that have gone to court over the operation or failure of operation of these notices and whilst therefore they do look innocuous, extreme care must be taken.

Having seen things go very wrong over the years in relation to these notices, we would always advise landlords or tenants to ensure that these notices are prepared and served by their solicitors. For the sake of a relatively small fee, it can save significant pain.

If you're a landlord or a tenant requiring legal advice on break notices, contact David Hacker on 020 8461 6151 or email david.hacker@thackraywilliams.com.