A break clause can be added to a lease to allow either the landlord or the tenant to end the lease early. They offer tenants flexibility to react to any changes in their circumstances (change in relationship or employment) as well as the conditions of the housing market.
However, break clauses can be complicated and if not performed correctly can result in the break not being allowed and the lease continuing. Here we discuss how break clauses can be used correctly to end the lease effectively.
What is the process for using break notices?
Break clauses can be used in a fixed-term lease by either party to bring the tenancy to an end. Depending on how the clause is drafted, the right to use the break clause can arise either on a specified date or dates or can be used at any time during the lease. The tenant wishing to serve the break notice must ensure they can do this- some break clauses can only be exercised by the original tenant and cannot be transferred to a new tenant, making them a personal clause.
The party should make sure they compile a notice that complies with the specific requirements of the break clause. The notice has to be clear and unambiguous, and there can be no doubt as to the meaning of the notice; otherwise a court can set it aside. It is highly recommended that a specialist property lawyer is instructed to do this to ensure that it is done correctly. A tenant can also authorise their solicitor to act as their agent in signing the notice but the tenant must ensure that the landlord is aware of the existence of the agency and its authority to do this. Service is normally on the landlord personally at their registered office (this can be located using a search of the Land Registry and Companies House, and it is recommended that these checks are performed). The lease will state the requirements for serving the notice, and these must be complied with carefully. If the lease states a minimum notice period, then the party must comply with this. The party serving the break notice need to obtain both proof of service and if possible, get the party that received the notice to acknowledge service.
Once notice has been served, the date should be noted and very careful records need to be kept in case the landlord contests whether it was correctly executed. There are usually conditions stipulated in the clause that must be complied with to prevent the notice from being ruled as ineffective. These conditions include ensuring there is vacant possession (this includes all the tenant's belongings) and that the keys are returned to the landlord and there is no outstanding rent or bills. The tenant must pay any required fees and comply with any other covenants including repairing, decorating and other such obligations placed on them. Even if any outstanding sums are disputed these should still be paid, but this can be done on a "without prejudice" basis and challenged later.
Where the break date falls during a rental period, then the rent paid in the period after that date is not recoverable unless there is an express provision in the lease. Only if the lease specifically provides for the refund of any rent paid after the termination date will the court allow the return of these sums.
Once a break notice has been served (and providing it is not challenged) then it will effectively terminate the existing lease and it cannot be withdrawn unilaterally. Any mutual decision to waive the notice will be viewed as a granting of a new lease on the date that the break notice resulted in the termination of the original lease. A landlord can waive conditions in the break clause. If the waiver is made “without prejudice” then the landlord may be able to enforce them if the process fails and a break notice is served. Therefore, tenants should ensure that any waivers of conditions are not made “without prejudice” and that it is clear as to the conditions to which the waiver applies.
What can go wrong?
This is a complicated area and one where the parties should ensure that they have sought relevant legal advice. There are various mistakes and issues that can arise including:
- It will generally invalidate the break notice if the deadline for service of the break notice is missed or the notice is served on the wrong person or address. This means that the lease continues.
- If the notice has drafting errors this can cause issues though will not necessarily invalidate the notice.
- Where the tenant changes their mind about serving the break notice, this can end up being counter-productive. The landlord may decide to increase the rent in the new lease that the parties will need to enter since the correct execution of a break notice will terminate the original lease.
- Failure to pay rent up to the break date (including relevant charges) even if this falls just after a payment date has just passed. There is case law now on break notices which is being held as invalid because the tenant only paid up to the break date and not the whole period (and there was not a condition that allowed this).
- Failing to complete any necessary works on the property that are listed as conditions (such as redecorating or painting).
- Failure to leave vacant possession, including removing all possessions belonging to the tenant.
- If a tenant relies on “without prejudice” discussions with the landlord that are non-binding relating to the waiver of a break clause condition.
If a mistake is made, this does not always mean it will be fatal to the break clause and receiving expert advice as soon as possible from specialist solicitors is highly recommended to ensure that the best possible outcome can be achieved.
Contact our Property Solicitors in Mayfair and throughout London
Failure to properly draft and serve a break notice can have dire financial consequences for a tenant, who may become subsequently locked into a contract for several years or overpay for rent sums after the actual end date of the lease. It is highly advisable to seek the advice of a solicitor before drafting or proceeding to serve a break notice. On the other hand, a landlord must ensure their conduct does not amount to a waiver of break clause conditions if they wish to challenge the validity of the break notice.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 3811 3600 or complete our online enquiry form.
However, break clauses can be complicated and if not performed correctly can result in the break not being allowed and the lease continuing. Here we discuss how break clauses can be used correctly to end the lease effectively.
What is the process for using break notices?
Break clauses can be used in a fixed-term lease by either party to bring the tenancy to an end. Depending on how the clause is drafted, the right to use the break clause can arise either on a specified date or dates or can be used at any time during the lease. The tenant wishing to serve the break notice must ensure they can do this- some break clauses can only be exercised by the original tenant and cannot be transferred to a new tenant, making them a personal clause.
The party should make sure they compile a notice that complies with the specific requirements of the break clause. The notice has to be clear and unambiguous, and there can be no doubt as to the meaning of the notice; otherwise a court can set it aside. It is highly recommended that a specialist property lawyer is instructed to do this to ensure that it is done correctly. A tenant can also authorise their solicitor to act as their agent in signing the notice but the tenant must ensure that the landlord is aware of the existence of the agency and its authority to do this. Service is normally on the landlord personally at their registered office (this can be located using a search of the Land Registry and Companies House, and it is recommended that these checks are performed). The lease will state the requirements for serving the notice, and these must be complied with carefully. If the lease states a minimum notice period, then the party must comply with this. The party serving the break notice need to obtain both proof of service and if possible, get the party that received the notice to acknowledge service.
Once notice has been served, the date should be noted and very careful records need to be kept in case the landlord contests whether it was correctly executed. There are usually conditions stipulated in the clause that must be complied with to prevent the notice from being ruled as ineffective. These conditions include ensuring there is vacant possession (this includes all the tenant's belongings) and that the keys are returned to the landlord and there is no outstanding rent or bills. The tenant must pay any required fees and comply with any other covenants including repairing, decorating and other such obligations placed on them. Even if any outstanding sums are disputed these should still be paid, but this can be done on a "without prejudice" basis and challenged later.
Where the break date falls during a rental period, then the rent paid in the period after that date is not recoverable unless there is an express provision in the lease. Only if the lease specifically provides for the refund of any rent paid after the termination date will the court allow the return of these sums.
Once a break notice has been served (and providing it is not challenged) then it will effectively terminate the existing lease and it cannot be withdrawn unilaterally. Any mutual decision to waive the notice will be viewed as a granting of a new lease on the date that the break notice resulted in the termination of the original lease. A landlord can waive conditions in the break clause. If the waiver is made “without prejudice” then the landlord may be able to enforce them if the process fails and a break notice is served. Therefore, tenants should ensure that any waivers of conditions are not made “without prejudice” and that it is clear as to the conditions to which the waiver applies.
What can go wrong?
This is a complicated area and one where the parties should ensure that they have sought relevant legal advice. There are various mistakes and issues that can arise including:
- It will generally invalidate the break notice if the deadline for service of the break notice is missed or the notice is served on the wrong person or address. This means that the lease continues.
- If the notice has drafting errors this can cause issues though will not necessarily invalidate the notice.
- Where the tenant changes their mind about serving the break notice, this can end up being counter-productive. The landlord may decide to increase the rent in the new lease that the parties will need to enter since the correct execution of a break notice will terminate the original lease.
- Failure to pay rent up to the break date (including relevant charges) even if this falls just after a payment date has just passed. There is case law now on break notices which is being held as invalid because the tenant only paid up to the break date and not the whole period (and there was not a condition that allowed this).
- Failing to complete any necessary works on the property that are listed as conditions (such as redecorating or painting).
- Failure to leave vacant possession, including removing all possessions belonging to the tenant.
- If a tenant relies on “without prejudice” discussions with the landlord that are non-binding relating to the waiver of a break clause condition.
If a mistake is made, this does not always mean it will be fatal to the break clause and receiving expert advice as soon as possible from specialist solicitors is highly recommended to ensure that the best possible outcome can be achieved.
Contact our Property Solicitors in Mayfair and throughout London
Failure to properly draft and serve a break notice can have dire financial consequences for a tenant, who may become subsequently locked into a contract for several years or overpay for rent sums after the actual end date of the lease. It is highly advisable to seek the advice of a solicitor before drafting or proceeding to serve a break notice. On the other hand, a landlord must ensure their conduct does not amount to a waiver of break clause conditions if they wish to challenge the validity of the break notice.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 3811 3600 or complete our online enquiry form.
