Why break clauses are problematic

Key to all of this is the actual break date itself and therein lies the problem as most tenants are unaware of the implications this can have.

The break date is important for two reasons: returning possession of the property; and the payment of rents.

Over the recent holiday period, we saw many lease breaks taking place, and it was common to see the break date as 31 December. In order to comply with a break, the tenant has to absolutely ensure that possession passes back to the landlord by the break date without exception. Yet again, we saw cases where landlords were claiming nobody would be available to take possession due to the holidays. Returning possession after the break date leaves the tenant open to the landlord disputing the validity of the break.

Most leases require the tenant to have paid rent for the full quarter, not just to the break date. Again, we often see landlords raising final rent invoices up to the break date only for them to then dispute the break itself on account of the tenant not having paid the full quarter’s rent. Unless there is specific provision to the contrary, the landlord is entitled to retain the rent for the period past the break date; if the break date is 31 December, a full quarter’s rent through to 25 March would be payable. Hence tenants should plan for the break date to be just before the new quarter.

Tenants should think carefully about the break date itself. While this is not directly on the subject of dilapidations, too many landlords try to take advantage of tenants exercising break options and tenants need to fully understand the implications of any break pre-conditions before entering into a new lease.

Paul Lande, chief executive, Dilaps UK