Break options within a commercial lease can be a battleground for landlords and tenants. The break option provides the tenant with an opportunity to relocate to cheaper or more suitable premises and even to renegotiate the terms of a lease.
When a business needs to respond proactively to changing circumstances, a break option can come as a commercial lifeline for a tenant. As such, it is imperative for a tenant to serve the notice exercising the break option correctly to benefit and for a landlord keen to retain occupancy of the premises, it is likewise important to ensure that the notice complies with the lease.
An example of a dispute when a Notice wasn’t served correctly…
Companies, large and small, can find themselves affected. In the Court of Appeal, Friends Life Ltd and Siemans Hearing Instruments Ltd came head to head in such a dispute. The Court held that a notice to exercise a break option was ineffective as it did not comply with all the specific requirements as set out in the lease. The outcome has led to concern that more tenants will now be challenged by their landlords seeking to protect rental income.
My advice to commercial tenants…
Ensure that when taking your lease, you fully understand what your break options mean in practice. Diarise the key dates providing a trigger for the option and be prepared to serve your notice in the correct format, to the correct location and the correctly named Landlord.
If you are a Landlord, you should be very clear on how a tenant is to serve a break option Notice, particularly if it is likely that you will find it difficult to re-let the premises. Ensure that the Notice complies with your commercial lease and double-check all of the details.
Need some guidance?
If you would like some advice or guidance on how to service the Notice correctly, or alternatively if you are a tenant and would like some advice on a Notice you have received, please do get in contact. You can reach me on 01604 828282 or via email.
If, as a tenant or landlord, you find yourself in a dispute regarding a break clause option, please contact my colleague, Sarah Canning in our Commercial Litigation team on 01604 828 282 or by email.