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Accuracy a priority in the exercise of break rights

03 Jun 2011

In the current climate, many tenants of commercial properties are recognising the importance of their ability to terminate their lease early, in accordance with the requirements of that lease. (Known as a ‘break right’). The effective implementation of a tenant’s break right has historically provided a number of challenges and the courts will strictly enforce any notice requirements and any other pre-conditions that are attached to it.

Failure to comply with any time limits in break clauses will lose the tenant the right to terminate the lease and any error in compliance with time limits cannot be rectified after the event. Legal advice should therefore be sought on when and how any notices need to be served as soon as the tenant considers exercising their break right and, in any event, well in advance of the latest date for service of the notice specified in the lease.

Additionally, when negotiating the terms of the lease, a well-advised tenant should, where possible, not agree to any preconditions that might affect their break right unless there are compelling commercial reasons for doing so and compliance with the proposed preconditions is within the tenant’s control. The types of preconditions that a landlord may seek to include are full compliance with lease covenants and payment of all sums due under the lease. A tenant should seek early advice on the acceptability of any preconditions proposed by the landlord. Ideally, this should be considered at the heads of terms stage to avoid unnecessary, and sometimes lengthy, negotiations on this point.

Please contact Richard Freeman-Wallace for further advice on 0191 232 8345 or email richard freeman-wallace@hay-kilner.co.uk

Please note:
This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.