Careful drafting of break clauses is essential as they can create a minefield of problems. With economic uncertainty in recent times, tenants have increasingly sought to exercise their break clauses to release themselves from their lease obligations. There has been much case law demonstrating how careful tenants need to be to ensure that a break can be effectively operated.
The terms of the break clause must be followed very strictly. If the terms are not followed to the letter the tenant will be at risk of losing its right to break. If the break is on a fixed date and the break is ineffective, this can prove very costly for a tenant as they would then be obliged to comply with the tenant covenants in the lease for the remainder of the lease term (for instance, paying rent) or at least until the right to exercise the break arises again (if indeed it does so).
Usually there will be conditions which must be met by a tenant before the break date so that the break notice can be effective. It is very important that these conditions are carefully considered well in advance of the date required to serve the break notice, just in case remedial steps need to be taken either before service of the notice or during the currency of it. For instance, a requirement to give “vacant possession” could mean that leaving a few items in the property, having contractors carrying out works, or leaving a bag of rubbish in the basement could result in a tenant’s break being ineffective.
Commonly leases will specify that a tenant can break the lease upon providing a certain period of notice to the Landlord. Care needs to be taken over the wording, for instance if a lease referred to 3 months notice being given (rather than not less than three months notice), the tenant would be required to give exactly 3 months notice. This would make it very difficult for the tenant to ensure that the correct notice is served.
The main thing to bear in mind when considering a break is to seek expert advice well in advance and not delay.