Newly qualified Solicitor, Lauren Toynton, talks through Tenant Break Clauses.
A change of premises, or indeed the lease of the first premises, is an exciting and important step for most businesses. Business owners need to carefully consider securing a lease which is long enough to facilitate the growth of their business, whilst ensuring that they are not bound by an unsuitable lease. Often finances and the direction of a venture are yet to be established, as it is difficult to predict the future of any business.
A break clause provides for a Tenant to serve notice on their Landlord to terminate the lease prior to the determination of the lease. For example, the Landlord may grant a Tenant a lease of 10 years however agree a tenant break clause which provides for the Tenant to bring the lease to an end after 3 years if they wish.
The incorporation of a break clause within the lease is only the beginning, and you should always seek legal advice as to how to serve notice in accordance with the lease. Failure to do so correctly may mean that the opportunity to operate the break clause passes a Tenant by, ultimately meaning they must remain in the property for the remainder of the lease (or until the next break date).
For example, in a recent case ‘Riverside Park Limited v NHS Property Services Limited [2016] EWHC 1313 (Ch)’ a tenant sought to exercise its break option in a lease. The break option was conditional upon the tenant giving vacant possession. The Tenant had made various alterations to the property, including the instalment of internal demountable partitioning. These, together with other various items, were left in the premises when the Tenant vacated. The court found that the items were chattels and as such the Tenant had not therefore given vacant possession. This resulted in the Tenant having failed to exercise its break option.
As demonstrated above, break options are a technical area of law and you should always ensure that you seek legal advice to ensure you comply with the lease requirements.
If you require any advice in relation to commercial property including leases, please do not hesitate to contact Lauren Toynton on 01603 677032 or by email mailto:lauren.toynton@spiresolicitors.co.uk
