Get it right: top tips for commercial tenants seeking to exercise a break clause

Get it right: top tips for commercial tenants seeking to exercise a break clause

The Law Reports are littered with examples of cases where a commercial tenant has tried but failed to serve a valid notice exercising its right to break a commercial lease. The consequences of getting it wrong can be financially disastrous for a tenant particularly where the right to break can only be exercised on one specific date.

I have put together some key tips which tenants should take into account when serving a Break Notice:-

  • It is absolutely essential that the tenant reads the lease carefully and ensures that the break notice complies with the precise requirements set out in the lease.  Any minor deviation is likely to lead the Court to construe the Notice as being invalid.
  • It is vital to ensure that the service provisions are complied with to the letter including sending the notice to the address specified in the lease.  If in doubt serve the notice on all relevant addresses and ensure that an acknowledgement is received from the landlord accepting that it has been validly served before the relevant deadline.
  • It is also good practice to serve the notice by Recorded Delivery or even better use a process server who can ensure that a signed receipt is obtained on delivery.  This is particularly important in circumstances where the deadline is imminent.
  • Ensure that any conditions to which the right to break is subject have been fully complied with.  Failure to pay the rent or even a trivial breach of the lease can in certain circumstances render the notice invalid.  Break notices which are subject to onerous conditions do require a detailed “compliance review” to be carried out well in advance of the intended termination date to ensure that nothing has been missed.
  • Where there is any dispute regarding the rent or service charge it is better to pay what the landlord is demanding in full at least on a without prejudice basis.  Recovery of the monies can be made later in separate proceedings.
  • Where the relevant clause in the lease requires a payment to be made then you should ensure that this payment is made in cleared funds before the required date.  Do not rely on a cheque!
  • It is vital to note that once the notice has been served it cannot be withdrawn unilaterally.  If you are not sure about whether or not you wish to exercise the right to break it is better to negotiate new terms with the landlord in lieu of serving a notice.
  • Given the financial consequences of getting it wrong tenants are well advised to instruct a solicitor to serve the notice on their behalf.  An experienced solicitor will ensure that all of the requirements contained in the lease are complied with.  Moreover all law firms are insured and therefore liable to compensate the tenant in the event that an invalid notice is served due to negligence on the solicitors’ part.

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