More Break Clause Complications For Tenants

As a firm, we have written many times about the conditions attached to break clauses and how essential it is for a tenant to ensure complete compliance with those conditions otherwise the break clause is unlikely to be effective and the tenant will be stuck with the lease.

Over the years the conditions landlords can attach to break clauses has reduced and changed.  The first condition to go during my time in practice was the requirement for tenants to comply with all the covenants of the lease.  It is now generally accepted that the only conditions which are reasonable require the tenant to:

• Give a certain amount of written notice (usually 6 – 9 months)
• Pay the annual rent
• Give up occupation of the premises.

However there are quite a few leases still in existence where more stringent conditions were imposed and the latest case to end up in the court is a variant related to the tenant giving up occupation.  These days a tenant should agree only to giving up occupation but it is not long since it was common for a tenant to have to give “vacant possession”.  The reason the terminology changed was because there has been a lot of legal argument over the years about exactly what vacant possession means.  Previous court disputes tended to involve the tenant leaving items or even internal walls the tenant had erected in the premises.  This new case involves the tenant stripping too much out of the premises – so much so that the court decided the tenant had left a shell and actually had removed part of the landlord’s premises (as the definition of premises included the landlord’s fixtures).  The court decided that the tenant had not given vacant possession, that therefore the break was not effective and the tenant continued to be liable under the terms of the lease.

The case is being appealed but in the meantime if you have a break clause coming up please consider taking specific advice as to exactly what is required.