So, you have a break right in your commercial lease and you are thinking of operating it? Perhaps you want to get out of your current tenancy because your business:
- has adapted in recent times and your business is now fully remote;
- is seeking to downsize and reduce its property outgoings; or
- is growing and it is ready for larger or more bespoke premises.
When looking at breaking a lease on a commercial property, you want to make sure that you exercise your break right properly, otherwise you could find yourself committed to the existing tenancy, not being able to move and possibly facing double tenancy obligations if you have already committed to a new premises.
Break rights are tricky! Even the legal experts will admit that.
These are the top three mistakes we see tenants make when they don’t obtain legal assistance with breaking a lease:
AGREEING TO ONEROUS BREAK CONDITIONS IN THE TENANCY AGREEMENT
To help make the process of operating a break right smooth, it is most helpful to lay the right foundations by agreeing operable and fair terms at the outset when agreeing the terms of your tenancy.
NOT PREPARING AND SERVING THE NOTICE PROPERLY
The terms of the lease must be strictly followed regarding the notice including method of service, the contents & form of the notice and who should be served. However, often the service requirements are not exactly followed or are interpreted incorrectly – there are complex legal rules involved which are often not obvious on the face of the wording in the tenancy agreement.
NOT COMPLYING WITH BREAK CONDITIONS
Conditions are often trickier to successfully operate than they seem on the face of it as implied legal rules apply. Particular red flags are conditions involving the payment rent (and other sums), compliance with lease obligations and the requirement to provide vacant possession. For example, tenants often think that the requirement to pay rent means they only need to pay rent up to break date, however, usually it requires the full quarter to be paid even if the break date falls mid quarter and ‘vacant possession’ has a more complex meaning beyond simply moving people and your belongings out of the premises.
Unfortunately, even the most diligent tenants who have attempted to comply and follow the requirements but perhaps haven’t sought legal advice when negotiating or exercising the break clause, in order to keep costs down, frustratingly end up in a dispute with their landlord. Often this results in the tenant taking on additional obligations or paying their way out of the lease, which obviously ends up costing more in time and legal fees.
It is not possible to provide a one size fits all approach when providing advice regarding break rights and it is therefore important to seek advice that is bespoke to you at heads of terms stage and when contemplating exercising a break. Our contact details are below if you wish to contact us regarding a break right.
If you have any questions about breaking a lease, please contact Lauren O’Sullivan.