On the face of matters, a break clause giving a tenant a right to terminate a lease should be relatively straightforward.
Where conditions are expressly stated to enable the tenant to terminate the lease on the break date the law requires the tenant to comply with those conditions strictly.
For example, if the break provision is subject to the tenant having complied with all its covenants contained in the lease then this in itself is problematic because any breach (even if it is trivial) could have the effect of disqualifying the tenant from terminating the lease on the break date. For example, if the lease requires the tenant to keep the property in good repair and condition and there are any repairs required (and inevitably there always will be) then the exercise of the break provision by the tenant will be ineffective.
Our advice is always to avoid a break clause being conditional upon the tenant having complied with all terms of the lease and indeed generally we would advise that it should only be conditional upon the annual rent having been paid and on the break date there being no persons in occupation and that the tenant has substantially removed its moveable items.
The other issue to bear in mind is that on the basis that the rent is paid on the quarter days (i.e. 25th March, 24th June, 29th September and 25th December) if the break date is, say, 30th October it will be a condition of the break clause that the rent for the whole of the quarter due on 29th September will have been paid.
I think it is fair to say that common sense would dictate that the tenant should then be reimbursed the rent paid for the period after the break pro rata (i.e. from 1st November to 24th December). However, the Courts have stated that unless the lease states that rent for the period after the break date has occurred should be repaid then the Landlord has no obligation to pay it.
Although this was a decision of the Court of Appeal, we do think that this decision lacks common sense not least because a situation could arise whereby the landlord has a new tenant ready to move in on 1st November and therefore in consequence unless there is an express provision to repay the outgoing tenant for the period from 1st November the landlord for the period from 1st November to 24th December will receive double rent.
It is important, however, to ensure that as a tenant if there is break date which is not at the end of a quarter the lease expressly states that the outgoing tenant will be repaid the rent for the period after the break date.
For more information on any of the above, please contact Steven Porter, by email: sporter@jpclaw.co.uk, or by telephone: 020 7644 6091 or contact his via LinkedIn profile.
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice.
