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Complying with a Break Clause

11th July, 2013

A break clause gives a tenant the right to bring a lease to an early end at a specified point or points in the term of the lease, if the correct notice is given and if any conditions attached to right are strictly performed.

One of these conditions is usually that any rent or any other money payable under the lease is paid in full at the break date. If, for example, rent is outstanding at the break date, the tenant will not be able to exercise his right to break and will have to wait until the next break date, or if there is not one, the end of the lease.

In the case of Avocet Industrial Estates LLP v Merol and Another [2011] EWHC 3422, held that a tenant who owed default interest on late payments under a lease had not made all payments due under the lease as required by the break clause and therefore the right had not been validly exercised and remained bound for the remainder of the lease.

The judge found this to be the appropriate outcome, even though the landlord had not issued a demand for the default interest and the amount of default interest in question was negligible.

The judge admitted that the outcome was ‘harsh’ and this case serves as a reminder that the conditions of a break clause must be strictly adhered to by the tenant if they want to utilise a break clause to end its lease early.

For more information and advice on the operation of break clauses, please contact Beth Wheatley on 01244 405546 or email [email protected].

 

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