Breaking Up Doesn’t Have to Be Hard: FAQs for Break Clauses in Commercial Leases

What is a break clause?

A break clause is a provision in a lease which provides the landlord, tenant or both parties the option to terminate a fixed term lease early. Although, it is most commonly a right given to the tenant to exercise a break in a lease unilaterally. The right to break the lease can arise on one or more dates, may be exercisable at any time during a term, or on a rolling basis.

When can I exercise my right to break my lease?

The lease will usually put a restriction on the tenant to exercise their right to break the lease before a specific date. This is usually called the “Break Date”. A typical provision found in a lease is for the tenant to serve notice under the break clause before the Break Date, known as a break notice. For example, a lease might require a tenant to serve a break notice 6 months before the Break Date.

The party wishing to break the lease must take particular care when serving a break notice to ensure it complies with the provisions of the break clause in the lease, as the court will construe the provisions strictly. If the lease requires notice to be served in a specific format i.e., in writing, and for service to be effective requires the notice to be delivered by first class post to the landlord’s registered address, it is important these steps are taken to ensure full compliance. Otherwise, there is a risk that any notice served will not be valid.

What is the relationship between break clauses and other terms in the lease?

A break clause may be given as an option to a tenant to allow them the right to terminate a lease before the rent review date. This gives the tenant the opportunity to break the lease before rent increases.

It is important to check the break clause for any specific provisions on notice and service. If there are no specifics in the break clause itself, then it is likely any break notice will need to comply with the general service provisions in the lease. Again, careful consideration should be given to the entirety of the lease to ensure that all requirements therein have been considered and adhered to.

What happens if I make a mistake in the Notice?

Firstly, it is important that a tenant, or a party to a lease exercising a break clause complies with the requirements set out in the lease, however mistakes do happen. The court have held that where there is a minor error in a notice, such as a break notice, it does not necessarily invalidate that notice.  However, the mistake must be minor, and it must still be clear to a reasonable recipient that the break notice intended to exercise the right to break the lease. It is unlikely, for example, that errors with service of a break notice would be saved under the Mannai* principle.

What happens if I serve a defective notice?

The difference between a mistake in a notice, in comparison to a defective notice is that a mistake may be capable of being saved and render an otherwise invalid notice, valid.  A defective notice, on the other hand, will usually invalidate a party’s contractual right that the notice sought to operate. That could have far reaching commercial consequences, for example, an invalid break notice that cannot be saved by Mannai or is not able to be re-served in time is likely to see the tenant having to comply with its obligations for the full contractual term of its lease. If a party to a lease thinks that it might have served a defective notice, that party should seek legal advice as soon as possible.

* Mannai Investment CoLtd v Eagle Star Life Assurance Co Ltd [1997]

If you require advice on a commercial lease, be that exercising a break clause or more generally, do not hesitate to contact our Property Disputes Team on 01603 610911.

Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.