With the recent “Covid Lockdown” forcing commercial Tenants to close their premises, it has become an idea for a Tenant to seek a break clause when negotiating a new Lease.
A break clause entitles the Tenant to bring the Lease to an end on a given date, preventing further rent liabilities. It is important to be specific as to what conditions have to be observed when doing so, careful legal drafting is essential. Usually, the Notice needs to be in writing and served no later than a given period before the Break Date (i.e. the date the Lease is to end).
This is usually six months to give the Landlord time to find another Tenant. Invariably, there will be a requirement that the headline rent is paid in accordance with the Lease provisions up to the Break Date. This can mean the Tenant paying beyond the Break Date if the rent payment date does not coincide with the Break Date itself. There is often some negotiation as to whether the Tenant has to give up vacant possession of the Property or simply cease to occupy the Property. There is a difference. If substantial items of furniture or partitioning are left behind, it has been held by the Courts that vacant possession is not given and the Tenant, in that case, had not successfully broken the Lease. They would, however, have ceased to occupy and may have been able to “break” if the wording was different.
Landlords will try and impose other conditions before a Tenant can break the Lease that would make termination that much harder. It is therefore essential to get good legal advice before entering into a Lease with Break Clauses.
By Simon Nethercott
Solicitor, Senior Partner and Head of Business & Commercial