Break Clauses

Are They Worth The Paper

They Are Written On?

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Break clauses, what are they?

In theory a break clause, if correctly worded by your solicitor will allow you to come out of your lease before the end of the term. In fact, we have heard of some instances where there are double break clauses giving you two opportunities to come out of the lease before the end of your term.

We would comment that landlords do not give break clauses lightly, as it means they no longer have a guaranteed income stream from the property and would have to look at re-letting it, which could be a costly, difficult or impossible process, depending upon the climate. Also, in a good market they could be wishing that you implement the break clause as they could let at a higher rate. In a nutshell the break clause allows you to exit the lease as long as you comply exactly with the requirements of the break clause, which is easier said than done.

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Break clauses make tenants happy!

Many a tenant will feel so much happier with a break clause as it allows them to leave the lease after a set time if things aren't going to plan, or if things are going better than planned. Equally, it could mean they are paying a higher rent because, as mentioned, the landlord will have to take into consideration that you may have to re-let the premises.

What happens at the end of a break clause?

With the end of a break clause coming up you need to ensure that your solicitors are ready to serve the break clause and serve it correctly. We have recently come across a case where a basic error was made by the solicitor where the break clause was served late. This therefore meant that the tenants had to carry on with the lease until it ended, which fortunately was only a year later, but from our understanding of the case this meant that the tenants were then liable for the rents and rates for the remainder of the lease and, in the case in question, are currently suing their original solicitors and this is very messy.

You don't want to get a break clause wrong

As the tenant / business owner you don't want to get the break clause wrong. You can only rely on your professional adviser to a certain extent as your break clause will be only one of many things that they are doing, however it will be the thing that you need doing. It could completely throw out any future business plans you have to buy or lease a property, which is bigger to allow for your business's expansion and it will mean you will also be paying the rent and rates on the property you have got, albeit that you are suing the solicitor for making the error! However, it still doesn't help your cash flow.

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We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

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