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Breaking up is hard to do for tenants

The number of our retail tenant clients who have approached us for advice on exercising break options in their leases has been increasing.

A break option may allow a tenant to vacate unprofitable premises early, but exercising the option can be fraught with difficulties.

A landlord will probably not want their tenant to leave because the unit may be difficult to relet, there will be a loss of income and the void unit may cause the landlord funding problems.

In this market a landlord’s lawyer will carefully scrutinise every break notice received and will look for any way of challenging it - make sure you do not get caught out.

Break clauses vary. An ‘unconditional’ break option means that apart from giving notice properly, no other conditions exist.

A ‘material respects’ break option means minor breaches of covenant will not invalidate the break option. But a ‘conditional’ break option means that rent and service
charges must be paid up to date and, moreimportantly, the tenant’s repair clause must be complied with prior to the termination date.

In this economic climate landlords will challenge break clauses rigorously. A landlord can instruct a building surveyor to inspect the premises on the termination date.

They are paid to identify any fault, however small. Tenants must plan ahead, and can instruct their own surveyor to identify problems and fix them
before the lease ends.

Some tenants have attempted to serve the break notice themselves to save costs. This area is a legal minefield. A tenant should not take any chances and give the landlord ammunition to argue about the validity of the notice.

Nigel Griffiths is a specialist commercial property lawyer and a partner in law firm Morgan Cole

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