COMMERCIAL
Do Not Block Exit
Joanne Wright, a solicitor, says tenants should beware of the traps that can invalidate a break clause.
T
here are significant implications in value to both the landlord and tenant where a party has a right to end the lease at an early date
through the operation of a break clause. Landlords may want the ability to end so they can redevelop and tenants may want the ability to end the lease to manage business finances, relocate or protect against future failure. In practice, what ought to be straightforward is often confused by ambiguous drafting, unclear clauses and other traps which could mean that the break clause is not validly operated. In recent years landlords have, more than ever, wanted to avoid premises being handed back to them. For this reason they have been more keen to seek legal advice when a tenant has served notice to end a lease to see if there is any way they can safeguard their asset by maintaining the break clause has not been validly exercised.
RECENT CASES
Recent cases highlight the need for both parties to consider and take legal advice early at every stage. From agreeing heads of terms through to lease negotiation as well
60 APRIL 2012 PROPERTYdrum
The Courts adopt a strict interpretation of the lease which has led to what many would deem harsh and unjust decisions.’
as on the service of the break notice and the satisfaction of any pre-conditions to validly operate the break clause and end the lease. The financial consequences of getting it wrong can be very high. As the cases show, the Courts adopt a strict interpretation of the lease which has recently led to what many would deem to be “harsh and unjust decisions”. In Avocet Industrial Estate LLP v Merol and another (2011) EWHC 3422 (Ch) the High Court considered whether the tenant had validly exercised its break. The lease had a break clause which was subject to
several conditions including one requiring the tenant to pay a sum equal to 6 months rent on or before the break date and also a clause which stated that “the break notice shall be of no effect if at the break date any payment under the lease due to have been paid on or before that date has not been paid”. The tenant served a break notice in the
appropriate form on the landlord which the landlord did not give any substantive response to; between the date of service and the date the Lease was due to end, the tenant paid its rent or insurance rent late on three occasions. The landlord did not issue any demand for default interest. On the break date the tenant sent the
landlord a cheque for six months’ rent (one of the conditions of the lease) with the keys and written confirmation that they had vacated the premises; reiterating the tenant was not aware of any outstanding sums due. The landlord issued proceedings against
the tenant for non-compliance with the terms of the break clause. The Court strictly construed the terms
of the lease in connection with payment of default interest. Default interest was due from the date on which payment should
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68