Break Clauses in Commercial Leases

A break clause, also known as an ‘option to determine’, is a provision that is commonly included in a commercial lease. The purpose of the clause is to give either, or both parties the option to end the lease before the lease term expires. The lease would usually set out the terms of the break clause. 

Why Would I Want to Include a Break Clause in My Commercial Lease?

A tenant or a landlord may wish to bring the lease to end earlier than the expiry date of the term of the lease for several reasons.

A break clause can provide the tenant with flexibility in challenging market conditions. By having the option to determine the lease early, the tenant is able to reduce their liability should the their business prove to be unsuccessful.

A landlord may want a break clause in their favour as it allows them to respond to fluctuations in market conditions, such as seeking higher rent or more desirable tenants. The option also enables the landlord to upgrade or rejuvenate the property.

How Do I Exercise the Break Clause?

This entirely depends on the provisions set out in the lease, and each lease will be different. It is rather common for the break to be subject to certain conditions. For example, the tenant may exercise their option to determine the lease, so long as all rents and monies owed to the landlord have been paid. If you are looking to rely on the break clause in your lease, it is extremely important to check what conditions, if any, need to be satisfied.

It is also worth considering how much notice is required to exercise this right. It may be that the break can be exercised on the 5th anniversary of the lease, giving at least 6 months’ notice. Some leases even include a ‘maximum’ notice period, such as at least 6 months’ notice, but no more than 12 months.

As a landlord, if the tenant serves notice to break the lease, the notice period allows you time to find another tenant for the property, meaning you are not without rental income.

We would recommend you speak to a Solicitor to help you through the process of exercising the break clause in your lease. This will ensure the conditions are met, and the break is validly served. If the conditions are not met, or the notice is not served to the correct person or at the correct address, the lease will continue, which can prove costly.

Contact Buxton Coates Solicitors today on info@buxtoncoates.com or 0330 088 2275.