To break or not to break…

 

I’m referring to break clauses in leases. There will be many tenants who can exercise a break clause this year and, perhaps unsurprisingly, the tenants I have spoken to are intending to.

The last 10 months have put every aspect of how a business is run under the microscope and most businesses have changed how they use their premises. Some need less room for people, as there is more flexible working, but more room for storage as sales have gone online. Some businesses are intending to make the changes permanent, so they are looking to end their lease to move to a more suitable premises.

But the flip side of this, is that the tenants don’t really want to leave their premises because they work for them in other important ways, such as location – the most important consideration according to Kirstie and Phil.

In these cases, a break clause could be used to open negotiations with the landlord and, instead of serving a break notice, enter into a deed of variation to, for example, allow the tenant to sublet part of the premises or change the permitted used within the lease. This way the landlord keeps their tenant, and the tenant has more flexibility.

Landlords could also pre-empt a tenant exercising their right to break by speaking to the tenant to see if they are able to agree something which allows the premises to again work for the tenant.

But remember, break clauses need to be treated with care, and if you are, or aren’t, going to exercise a right to break you should seek legal advice as early as possible.

If a break date is missed then you have lost your opportunity to end the lease, however, if a break notice is served it cannot be withdrawn – even if both the landlord and tenant agree!

And, if a break clause states that the break notice is to be served on green paper, folded into a paper aeroplane and scented with Chanel No. 5…. That is what you must do!

For more information please contact Ruth Burrell by emailing ruth.burrell@nexa.law

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