Commercial Lease Break Clause Disputes

A break clause may contain mandatory notice provisions that outlines how and when the break notice must be served. If these steps aren’t followed correctly, the break notice could be invalid.

Key Requirements of a Break Notice: 

To ensure a break notice is served correctly, the following three areas must be considered:

• The method of service (e.g. recorded post, hand delivery, or email if expressly allowed).
• The format of the notice, sometimes requiring a specific wording or a draft annexed to the lease.
• Strict adherence to notice periods - the notice must be drafted and served by well in advance of any given break date.

If a notice does not meet the strict requirements of the break clause, then it will usually be invalid and the break will be ineffective.

If the lease doesn't specify a form of service, then the general notice provisions in the lease may, apply but these are usually 'permissive' rather than 'mandatory'. This area can get very technical, so we recommend seeking advice from our trusted property litigation solicitors before you issue a notice. 

Typically, a break option will be conditional upon the tenant complying with certain conditions. Some conditions include:

• Full payment of rent and other sums due under the lease, including service charges and possibly VAT.
• Strict compliance with the break clause notice requirements, meaning any notice must follow the exact rules set out in the lease.
• Returning the property to the landlord with “vacant possession”, which has a very specific legal meaning.
• Payment of any break premium specified in the lease, which may or may not include VAT.

Sometimes, leases also include more demanding conditions, such as:

• Compliance with lease covenants, either specifically listed or in a more general sense.
• Not be in material breach of repairing obligations under the lease.

Meeting all these obligations is essential to successfully terminate the lease without unnecessary legal complications.

Following the conditions of a break clause is often the most disputed part of ending a lease. Newer leases sometimes have more straight forward terms, but this is not always the case and landlords don’t have to explain them to the tenant. Strategic letters can sometimes prompt a response from an uncooperative landlord, but if that fails the court can be asked to decide what the condition really means. 

Preservation of Rights

Using a break option does not usually stop landlords from being able to make claims for breaches of the lease that happened before the break date. Tenants must still meet their lease obligations up to that point, including any duties to repair, decorate, or return the property in a certain condition or way. If not, the landlord may bring a Terminal Dilapidations claim (or take other legal action) after the lease ends. 

Some break clauses don’t state an exact date, and instead refer to a rolling right or a right that arises on the 'anniversary of the term.' If this is the case, the specific lease wording is critical, but the general principles set out below should apply:

Some leases can also include phrases like it 'commences on' a set date and 'expires on' another set date. In those cases, both dates should be considered when the break date. If you're at all unsure, our property litigation solicitors can help clarify the correct interpretation before any notice is served.

Break clause issues can be complex and costly. Whether you're a commercial landlord or tenant, getting it wrong can lead to major financial consequences or being locked into an unwanted lease. 

Our expert property litigation solicitors provide clear, practical advice tailored to your business needs. With extensive experience in commercial lease disputes, we’re here to guide you through every step. 

To speak to a member of our team, call us on 0330 123 1229, email info@smithpartnership.co.uk or complete our contact form.