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Break notices, also referred to as break clauses, are common contractual provisions in commercial leases that allow a landlord or a tenant to bring a lease to an end early.
They are extremely common but often complex, and usually require the party serving the notice to do so within a specific window of time with certain conditions met either prior to the notice being served or before the lease terminates. If the notice is not served correctly or if conditions are not complied with, then the break notice will not be effective and the lease will continue.
How JMW Can Help
It is crucial that notices are served at the correct place, on the correct entity and in the correct form to avoid any issues regarding the validity of the break notice. JMW is experienced in advising on break clauses in commercial leases and drafting and serving the appropriate notice.
We also advise the recipients of notices as to whether or not a notice that they have received is effective.
If you have a query with regards to a break notice, please call 0345 872 6666 and one of our real estate litigation solicitors will be happy to discuss this with you. Alternatively, fill in our online enquiry form and we will get back to you.
The potential pitfalls with break notices can be seen from the following two examples:
Property vacated by the break date with demountable partitions
In this case, the tenant vacated the property by the break date but left demountable partitions in the property. The landlord argued that the tenant had failed to give vacant possession, therefore, the break notice was not effective and the lease was continued.
Commonly, a break clause in the lease will require the tenant to give vacant possession of the property on or before the break date, as it did in this case.
The obligation to provide vacant possession is the commitment to ensure that a property is fit for occupation, both physically and legally, when a lease is terminated. A property is given with vacant possession if it is:
- empty of chattels (moveable objects);
- empty of people; and,
- no-one else has the right or ability to occupy or to possess it.
The Court held the demountable partitions to be chattels and not fixtures. The partitions were held to be chattels because they were easily removable and were installed by the tenant for their own benefit and business need.
The Court ruled that the partitions substantially interfered with the landlord’s use of the
property and the tenant had, therefore, failed to give vacant possession as required by the break clause. Consequently, the break clause had not been exercised correctly and the lease continued to exist meaning the tenant continued to be liable for the rent and other obligations under the lease.
Failure to action break notice correctly
In this case, the tenant agreed to a 10-year lease of property subject to a break clause permitting the tenant to end the lease after five years. In order to exercise the break option, the clause provided that the tenant must give not less than nine months’ prior written notice to the landlord.
In addition to the break clause conditions, the lease contained provisions with regards to the
serving of notices. These provisions required copies of all notices (which included break
notices) to be served on the landlord and the property manager for the building.
The tenant served a valid break notice on the landlord by the break date but failed to serve a copy of the break notice on the property manager. The Court held that by failing to serve a copy of the break notice on the property manager, the tenant had not validly exercised their option to end the lease early and that the lease would continue for the full term.
How do I serve a break notice?
The service requirements for a break notice will be detailed in the lease, and these requirements should be checked carefully to ensure compliance. It may be necessary to serve the break notice by registered post. In certain circumstances, it may be necessary to effect personal service. It may also be a requirement for the break notice to be served on more than one person or entity, subject to the provisions of the lease.
What happens if I do not serve the break notice by the date specified in the lease?
Commonly, a break clause will stipulate that a break notice must be served by a certain period before the break date (i.e. not less than six months before the break date). If the break notice is not deemed served by this date, the opportunity to end the lease at the break date will have been missed and the lease will continue either until the next break date or until the expiry of the term. It is therefore important to allow sufficient time for service by post (or other means) to be effected before the expiry of the break date.
What happens if I fail to give vacant possession of the property by the break date?
Vacant possession is one of the most common pre-conditions of a break clause. Therefore, even if you serve the break notice correctly, you will still need to ensure that vacant possession is given by the break date. This generally means that the property must be empty and the landlord must be able to exclusively use the property without interference. If you vacate the property but leave significant amounts of rubbish or possessions, such
as furniture, in the property, this could prevent vacant possession being given and may result in the break notice failing and the continuation of the lease.
What happens if I serve the break notice at the wrong address?
If the break notice is served at the wrong address or on the wrong entity, the break notice will not be effective. It is important to carry out the necessary due diligence to ascertain the correct entity and details of where to serve the break notice, as the details of the parties and/or their contact details as set out in the lease may have changed.