Break notices for commercial tenants – beware of the common pitfalls
Due to numerous recent issues affecting the property market more and more break notices are being served by commercial tenants. At the same time, more and more tenants are seeking break rights in their new leases in order to provide them with flexibility when it comes to their real estate.
Due to numerous recent issues affecting the property market (including the pandemic, Brexit and the huge increase in internet shopping), more and more break notices are being served by commercial tenants. At the same time, more and more tenants are seeking break rights in their new leases in order to provide them with flexibility when it comes to their real estate.
It is important to be aware of the potential pitfalls which await as a tenant when you serve break notices, as failure to comply with the lease conditions could lead to the break being invalid. This, in turn, could result in you having to stay at the premises (and, more importantly, be liable for the rent etc.) for the remainder of the contractual term. Here we discuss just a few of the most common conditions:
Common conditions requested by a landlord could include:
- Service of written notice;
- Payment of all rent due under the lease;
- Giving up vacant possession of the property; and
- Performance of all covenants in the lease.
Pitfalls to be aware of
Service of written notice: you must provide the requisite notice and strictly comply with the terms of the lease. Even if the terms seem non-sensical, such as a requirement for the notice to be served on blue paper or sent by carrier pigeon, they must be complied with. You must also be aware that the break cannot be withdrawn once it has been served.
Payment of rent: you should check the wording of the lease to ensure what sums you are required to pay. For example, is rent defined as just ‘base rent’ or does it include service charge, insurance or even interest on any late payments. You must also check the lease for the last relevant rent (or rents) payment date before the break date because if the break date falls mid-quarter (or mid-month), any apportioned rent could invalidate the break.
Vacant possession: despite being a commonly used term, the phrase ‘giving up vacant possession’ is not completely clear-cut. Generally speaking, it means that a landlord must be able to re-let the property unhindered but you will need to check the terms of your lease on a case-by-case basis to ensure all items are removed (or kept) to comply with this condition.
All covenants: if you have this break condition in your lease, it is practically impossible to comply with as even a trivial breach will invalidate the break. You should try at all costs to avoid any such clause in a new lease as it could end up with the tenant, ultimately, paying a lump sum to the landlord to waive this condition of the break.
Summary
When negotiating a lease, as a tenant you should always take legal advice and pay careful attention to the break clause conditions before agreeing them, ensuring that you’re aware of all of the potential risks associated with each condition and that they are commercially acceptable.
The above risks are just some of the issues you may face and so if you are a tenant requiring advice, please contact Bradley Roberts.
Contact
Mark Hickson
Head of Business Development
onlineteaminbox@brownejacobson.com
+44 (0)370 270 6000
Related expertise
You may be interested in...
Legal Update
ASA bans “misleading” Huel and ZOE ads endorsed by Dragon’s Den Star
Opinion
Choose your words wisely: Balancing inclusivity and employees’ beliefs at work
Guide
Guidance for manufacturers of EVs and HEVs in the UK: ASA's non-exhaustive electric vehicle advertising guidance
Legal Update
(Deep)fake it till you make it? The ASA's role in regulating false celebrity endorsements
Press Release
Browne Jacobson strengthens Irish Corporate team with appointment of Principal Associate James Byrne
Legal Update
The benefits of good governance in sport
Press Release
Browne Jacobson to lead discussions on the future of real estate and infrastructure at this year’s UKREiiF 2024 event
Press Release
Browne Jacobson acquires business of real estate practitioner Paul Taylor Solicitors
Legal Update
The Baltimore bridge collapse: One of the biggest losses in maritime insurance history?
Legal Update
Understanding the ICO's new fining guidance
Legal Update
Unravelling the challenges and opportunities in UK sports governance
Legal Update
ASA ruling on Calvin Klein FKA Twigs advertisement
Press Release
Browne Jacobson successful for National Lottery in Court of Appeal
Opinion
Caregivers at work: Navigating new carer's leave regulations
Opinion
EHRC publishes new guidance on menopause and the workplace
Opinion
BBC personality wins appeal on IR35 status
Legal Update
Covid BI litigation (Autumn 2023): Insurance coverage disputes update
Legal Update
COP28 - how to limit and prepare for future climate change
Press Release
Browne Jacobson advise Maven Equity Finance on investment in Traverse Associates
Press Release
Three strong restructuring and insolvency team join Browne Jacobson
Podcast
The real estate podcast: How AI and tech is changing real estate
Legal Update
How to negotiate better ‘green’ provisions in your leases
Opinion
The Metaverse's influence on real estate: Implications for commercial retail clients and law firms
Guide
How to manage retail sector supply contracts and avoid disputes
Legal Update
Utilising prime retail sites to improve the health of our nation
Legal Update
A new era of opportunity for high street regeneration?
Opinion
Practical points from High Court ruling that Tesco has infringed Lidl’s IP rights in its famous yellow circle logo
Press Release
Corporate dealmakers advise Sodexo Live! on its move to 100% stake in global sports, travel and hospitality provider STH
Legal Update
Pitfalls for retailers to avoid when offering access to ‘buy now, pay later’ products
Press Release
Browne Jacobson’s Manchester dealmakers advise Spatial Global on its acquisition of Heathrow based freight specialist Hollyport Logistics
Opinion
Supreme court rules on retail tenant's service charge bill
Published Article - Consumer Duty
Consumer duty part 3 - 'The drill-down' into the 'cross-cutting' rules
On-Demand
The UK's green agenda - the outcomes of COP27 and actions since COP26
Press Release
Browne Jacobson’s retail lawyers advise Wilko on its strategic £48m sale and leaseback of Nottinghamshire distribution centre to DHL
Press Release
Suzanne Harlow joins Browne Jacobson as Non-Executive Director
Law firm Browne Jacobson is pleased to announce that Suzanne Harlow has been appointed Non-Executive Director of its Retail, Consumer & Logistics sector.
Legal Update
Fashion retailers: Is this the end for free returns?
Published Article
AI generated designs on retail products
Every AI will have its own terms of use. DALL·E 2’s Terms of Use dated 3 November 2022 specify that as between a user and Open AI, a user owns their prompts and uploads. Open AI also assigns to the user all rights in any images generated by DALL·E 2 for that user (subject to the user complying with those Terms of Use, and to a licence to use inputs and output to develop and improve the services).
Published Article - Consumer Duty
Consumer duty part 2 - 'The drill-down' into the 'cross-cutting' rules
Published Article
Luxury brands and sustainability: The challenges and solutions
Legal Update
The Retained EU Law
Created at the end of the Brexit transition period, Retained EU Law is a category of domestic law that consists of EU-derived legislation retained in our domestic legal framework by the European Union (Withdrawal) Act 2018. This was never intended to be a permanent arrangement as parliament promised to deal with retained EU law through the Retained EU Law (Revocation and Reform) Bill (the “Bill”).