Break clauses

Tenants of commercial property should be aware that strict compliance with lease conditions is required when looking to action a break clause. 

If a lease demands vacant possession, then the tenant must make sure they understand how this is defined in the lease, and comply. If the lease demands outstanding monies are paid, then the tenant needs to make sure this is done – even if it means paying interest on previous arrears. Even if the lease demands a certain shade of white is used to paint the property, failure to use this colour could mean a landlord may be able to resist the break. Essentially, there is no breach of the conditions too minor for the landlord to have grounds for refusing the break. Even if the landlord’s resistance can be challenged, just the fact that there is doubt might mean too much risk for the tenant, and mean they are better off paying a commercial sum to ensure the break runs smoothly. 

My advice to tenants is to take professional advice at the earliest stage possible to ensure they know what is required to comply, which usually means taking advice even before signing the lease. There is no point negotiating a tenant’s break in the heads of terms, if the tenant has little chance of ever being able to satisfy the conditions of that break clause. 

As a real-world example, I was once involved with a break clause so difficult to satisfy that the tenant ended up paying nearly six figures as a commercial settlement instead. Giving the clause more attention during the initial negotiations and drafting would have avoided this, but by the time the tenant wanted to break it was too late, and they were stuck.