Break clauses—a tenant’s practical lease negotiation guide
Break clauses—a tenant’s practical lease negotiation guide

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Break clauses—a tenant’s practical lease negotiation guide
  • Break clauses—commercial importance
  • Break clauses—at heads of terms stage
  • Types of break date
  • Break notices—content and service
  • Break preconditions
  • Miscellaneous break conditions to avoid
  • Rents—reimbursement and apportionment issues
  • Break clauses as a trigger for an additional rent-free period
  • Impact on rent review

Break clauses—commercial importance

Commercially, the break clause is likely to be a key clause for a tenant to give it flexibility. Failure to comply with the terms of the break could be costly for a tenant as the lease will continue. For landlords, the lease is crucial to maintain the capital value of its investment, and so landlords may be inventive (and prepared to incur legal costs) if they spot the opportunity to defeat the exercise of a break. The courts have generally adopted a strict approach to compliance with break provisions by tenants and so it is imperative that tenants consider how best to draft a break clause to minimise the scope for the tenant making a mistake and failing to break the lease.

Break clauses—at heads of terms stage

It is always good practice for tenants’ lawyers to review heads of terms as early as possible before the finalised heads of terms are issued. Tenants should approach a break clause in the heads of terms on the following basis:

  1. tenants should avoid conditions precedent and require that the break option is stated to be unconditional in the heads of terms. Often landlord’s surveyors will include various ‘standard’ conditions when drafting heads of terms without the parties explicitly agreeing them. It is difficult to overturn this if