Property Expert Warns of Break Clause Dangers

1st December 2011

A leading property litigation lawyer is warning that businesses could lose out on thousands of pounds if they fail to correctly exercise break clauses in their leases.

Break clauses could ruin a business if not exercised correctly, according to property experts at law firm Irwin Mitchell. Danny Revitt, a Partner in the Property Litigation team at the firm, advises that as break clauses are becoming more common in leases, businesses must be aware of the precise terms of their clause before exercising them. The firm has seen a surge in the number of instructions from both landlords and tenants to either serve notice or seek advice on the validity of notices received. Danny says: -Break clauses can work both ways. While they can be required by landlords to allow for them to end the lease if they want to redevelop the premises; in the current market, they are mainly included to provide tenants with flexibility. -The various forms of break clause, combined with the conditions attached to their successful operation, can mean that exercising them is often easier said than done. It can involve a great deal of planning and expense before the notice is served, and a great deal of work before the break date. -It is vital the notice is clear, giving all necessary information and is served on the correct party at the correct address by an appropriate method. He said: -Either party can fall foul of the conditions of the clause, so it is vital they are aware of them. It may state that the tenant must pay the full quarter's rent without any refund, even if the break falls during a quarter, which could obviously be a massive financial outlay, especially for small businesses which are moving premises and end up paying rent on two premises at the same time. Also sometimes even a trivial breach in exercising a break clause can mean that it doesn't take effect. -Break clauses cannot be withdrawn either, and so the party exercising the break must be sure of its decision.  The cost of meeting the conditions can be high, in terms of carrying out repairs or evicting sub-tenants, and so tenants should plan well in advance of exercising a break clause to ensure that they can afford to exercise it.