The requirements and obligations on tenants when exercising break rights are notorious in how they must be strictly complied with and following recent case law it has become clear there no lea way will be given to a tenant in such circumstances.
Below are a few tips that should be considered in order to ensure that you may successfully terminate your lease at the given break date.
1. Remember to comply with all terms of a break clause
As mentioned above, the terms of the break clause will be strictly construed. If a clause states that the break notice must be served on pink paper, then only that will do!
2. Check who has the right to terminate the lease
If you are not the original tenant to the lease, check that you actually have a the right to terminate the lease. It may be that the right was only granted to a named tenant.
3. Address the break notice to the right party
It is important that every party eligible to receive a copy of the notice does. If the landlord comprises of two or more individuals or entities, the notice should be addressed to all parties and sent to the correct address.
However, recent case law has confirmed that it may be sufficient to serve a break notice on the landlord’s agent. It is therefore worthwhile sending a copy of the notice to the landlord’s agent as well in order to cover all eventualities.
4. Have you got the timing right?
Whilst you may be lucky to have a break clause that specifies the actual break date many refer to an anniversary of a date relating to the lease, for example the term commencement date. If there is any possibility that the break clause could be interpreted in a different way to your interpretation then more than one notice may need to be served to ensure a successful termination of the lease.
5. Comply with all pre-conditions of the break clause
Often break clauses will be subject to the tenant complying with certain conditions. The most common conditions are set out below:
- Payment of rent – check what is meant by “rent”, it may not only be the annual rent but other sums such as service charge, insurance, VAT, interest or any other amount that might be reserved as rent and due to the landlord under the terms of the lease. If in doubt, ask the landlord in order to avoid receiving an invoice at the last moment so making the break ineffective.Again, be sure on timing. When do you have to make the payment – at the time of service of the notice or at the break date? If in doubt, do both!
Finally, in respect of payment of rent, if the break payment date falls between two rent payment dates, unless stated otherwise, the full rent instalment including for the period falling after the break payment date will be due. There must be no apportionment and no obligation on the landlord to repay unless an obligation is included on the landlord to refund any over payment for the period falling after the break payment date.
- Vacant Possession – again it is important to ensure that not only you have moved out of the premises but also that all fixtures, fittings and goods together with any subtenants and any workmen that may have been carrying out remedial work for you are no longer present. It is also advisable to hand back any keys or access fobs prior to the break date.
- Material Compliance – thankfully this very onerous condition is becoming less common in break clauses following case law. It can be difficult to comply with as interpretation of the obligation will be interpreted objectively. In some cases, even the most trivial breach could leave this type of condition unworkable.
- Penalty Payments – if a penalty payment is due ensure that it is paid to the right party at the correct time. It should be noted that whilst it is advisable to seek your landlord’s acknowledgement and confirmation on such things as outstanding sums and works required in order to material comply with the terms of the lease, there is no obligation on your landlord to respond. In these circumstances you must be proactive, if necessary check through records for outstanding payments and any interest that may have accrued and carry out all work you believe necessary.
6. Ensure that you have served the notice correctly
Whilst this might sound obvious, make sure that you serve the break notice not only in accordance with the terms of the break clause but also the service provision contained in the lease. If in doubt, serve the break notice in various way to ensure receipt. Also try to obtain some form of evidence of service, whether this is an acknowledgement from the landlord (which can not be guaranteed) or by using couriers and special delivery where delivery must be signed for.
As ever, it is advisable to obtain legal advice in relation to break clause in order to make sure that all eventualities are catered for.