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Break Clauses in a Commercial Lease - FAQs

Break Clauses in a Commercial Lease - FAQs

A break clause is a provision in a lease which enables either party (or both) to terminate the lease early. Our Property Litigation Team looks how to exercise this clause and the usually very specific terms you need to adhere to.

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When can a break clause be exercised?

​The right to break a lease term may arise on one or more specified dates or be exercisable during any time during the term.

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Is there a standard clause dealing with break clauses?

​No, they are individually negotiated by the parties at the time the lease is granted. The precise wording of the break clause needs to be correctly read and interpreted in order to know the circumstances when a break clause can be exercised.

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Can there be pre-conditions to exercise of a break clause?

​Yes. In fact, this is very common. Again the conditions can be individually tailored to the parties at the time the lease is agreed but often there will be a condition included that the tenant is fully up to date with all rent and service charge payments.

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How is a break clause exercised?

​Normally the break clause specifies the form of notice which must be served on the other party and the break clause often imposes specific requirements as to the method of service. These need to be precisely complied with. This was classically illustrated in the leading legal case on the point Mannie Investment Co Limited v Eagle Star Life Assurance Co Limited (1997 Appeal Court 749), where Lord Hoffman stated that: "If the notice clause had said that the notice had to be on blue paper it would have been no good serving it on pink paper....".

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Is the time the break notice is served important?

Yes, it is critical. Time is always of the essence in respect of time limits in a break clause.
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What are the typical conditions imposed before a break clause can be exercised by a tenant?

  1. All payments due under the lease have been made;
  2. all covenants have been complied with;
  3. vacant possession is given
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How do I know if my lease contains a break clause?

It should be apparent from reading the lease but these are very technical documents, and if you are unsure you should consult the Property Litigation Team at Pinney Talfourd LLP who can advise you.
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My lease does have a break clause but it is not exercisable yet, what should I do?

You should very carefully diarise the relevant dates and ensure that you take legal advice in good time before those dates to ensure you are in a position to exercise the break clause should you require it.
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Who should serve a break notice?

We would recommend in every case that solicitors be instructed to serve break notices as not only does the break notice have to be in proper form and comply with the terms of the lease, the tenant also needs to prove that it was served correctly. Pinney Talfourd are experienced in this field and utilise couriers and other tracked services where appropriate to always ensure proof of service is obtained.Read more about break clauses here.
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More information

Stephen Eccles is Head of the Property Litigation Team which includes specialist solicitors in break clauses. He has compiled these FAQs and says "This is quite generic information on break clauses which can be very precise. Timing is of the essence here and clients are strongly advised to get specific, professional advice to ensure that time limitations are not missed due to the smallest of errors."
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