A break notice is a written notice that can be sent to terminate a commercial lease. This is a contractual option available to a landlord or tenant (or both) that can be included in the lease to allow the party to terminate the lease before the usual contractual expiry date.
Break notices can regularly lead to conflict, as landlords can capitalise on any errors and force the tenant to remain for the remainder of the term or pay a premium. Seeking legal advice when drafting or dealing with a break notice is crucial.
It is highly important that break notices are prepared and sent strictly in accordance with the lease. As they are contractual notices, rather than statutory notices, the lease will govern their form and how they are served on the other party. Failure to follow the provisions of the lease can result in the notice being deemed invalid.
There are usually very strict time limits for serving a notice and they will align with the contractual break dates. The provisions of the lease relating to the break and deemed service of notices will need to be checked carefully to ensure compliance. Usually no less than 3, 6, or 12-months’ notice will need to be given. Failure to miss a deadline by a day will render a notice invalid.
Usually, a commercial landlord will insist on there being conditions attached to a tenant’s option to break. There is no limit on the type of conditions that can be inserted, but can include:-
Failure to comply with a condition precedent will render the break invalid and parties should always seek legal advice as to the extent of these important conditions.
A landlord and tenant should seek legal advice on the terms of their intended break clause when heads of terms are being agreed or the initial draft lease is being circulated. If the break clause is too restrictive and difficult to achieve, then it may be worthless to the tenant. If the break conditions are too weak, then the landlord can be left in a vulnerable position and not have much security.
When inserting a landlord’s option to break a commercial lease it is always imperative to take legal advice as to the impact of the Landlord and Tenant Act 1954. The break option will be worthless unless the tenant’s statutory security of tenure rights is also dealt with at the outset of the matter.
If a landlord considers that a tenant’s break notice is not valid or if any of the pre conditions have not been met, then it is essential that they take urgent legal advice as to the options available to them. The landlord can be in a position to negotiate a surrender at a significant premium if the tenant urgently needs to terminate the lease and their break right has been lost.
A tenant should consider their dilapidations liability as part of their decision on whether to serve a break notice.
A landlord should take advice from a solicitor and surveyor experienced in dilapidation claims as soon as they are in receipt of a break notice. Usually, a terminal schedule of dilapidations will be served without prejudice to the effectiveness of the break notice.
If you need any advice on break notices, please contact a member of our property disputes team or on 02920 829 100 for a free initial call to see how we can help.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
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