A break clause in a lease documents the landlord and tenant’s agreement to allow early termination of the lease before the lease would usually end at the end of the contractual term. A break clause can be mutual (i.e. allowing the landlord or the tenant to terminate the lease) or it can be for one party only.
If a party wishes to terminate the lease under the break clause provisions then they will be required to serve a break notice on the other party, specifying the break date.
A break notice can be served for whatever purpose unless specified in the break clause. Sometimes a landlord might want to terminate the lease early in the instance of a proposed development, so the break clause can specify that the landlord can only break in those circumstances, or a tenant may wish to terminate the lease early if a rent review means that the new rent might be too high for them.
A break clause can be fixed or rolling, meaning that the lease can terminate on set days (i.e. to coincide with a rent review or on the anniversary of the term) or it can be terminated at any date during the term.
If a tenant serves a break notice, then there will usually be a provision included to ensure that the lease will only terminate on a break date if all rents due under the lease have been paid, where vacant possession is given and where there are no outstanding breaches in relation to the tenant’s repair obligations under the lease.
If a break notice is not served in accordance with the terms of the break clause, then the lease will continue with full effect until the end of the term or until terminated in accordance with the other termination provisions in the lease.
If you need any further advice regarding your commercial lease or other commercial property related matter, please get in touch at bromleys@bromleys.co.uk, or call us on 0161 330 6821 and we would be happy to advise you.