Serving a Break Notice – 5 Tips Before Ending a Lease
As a landlord or tenant, of a commercial lease, you may find yourself in a situation where you need to terminate a lease early by serving a break notice. In such cases, a break clause can come in handy. A break clause is a provision in a lease that allows either the landlord, or the tenant, to terminate the lease early, usually at a specific point in time, and under specific instructions.
In this blog, we will provide you with 5 tips before exercising a break clause for both landlord and tenant. We will also cover the common disputes that arise between landlords and tenants, as well as property disputes that may arise during the process.
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What is A Break Option or Option to Determine a Lease?
In some leases, a break clause is referred to as an ‘Option to Determine’ clause. A ‘break notice’ is the same as an ‘option to determine notice’.
It is important to note that failure to meet all obligations under the lease to serve a valid notice can result in legal and financial consequences. Therefore, it is essential to seek legal advice to ensure that you have met all your obligations before the handover.
How Do You Serve A Break Notice?
1: Check the Lease
If you are a tenant or landlord, the first step is to check the lease agreement to determine whether there is a break clause and, if so, when it can be exercised. The lease agreement will also specify any conditions that must be met for the break clause to be valid. These conditions may include paying rent and adhering to covenants and conditions, and serving the break notice at a particular address. The latter is crucial if the landlord is a company based outside England and Wales.
It is important to note that break clauses can be complex, and the conditions for exercising the break clause may be strict. Therefore, it is essential to seek legal advice to ensure that you understand the terms of the break clause and the conditions that must be met.
2: Determine the Break Date
Once you have confirmed that there is a break clause, you need to determine the break date. The lease agreement will specify the break date, and you must ensure that you serve the break notice within the specified time frame. The break date is crucial, as it determines when the lease will terminate.
It is important to diarise the break date and work backward to ensure that you have enough time to meet all the conditions for exercising the break clause. You should also consider any notice periods that may be required before serving the break notice.
3: Serve the Break Notice
To exercise the break clause, you need to serve a break notice on the landlord. The break notice must be served in the correct format and within the specified time frame. It is important to ensure that the notice is served on the correct landlord, at the correct address, as failure to do so may render the notice invalid.
The notice should be served in writing, by first class post and/or signed for delivery, and you should obtain proof of service and acknowledgment of receipt to ensure that the notice has been properly served. The notice should also specify the break date and any conditions that must be met for the break clause to be valid.
4: Consider Repair or Reinstatement Obligations
Before the break date, you should consider any repair or reinstatement obligations that you may have under the lease agreement. The lease agreement will specify any repair or reinstatement obligations that must be met before the lease can be terminated. Failure to meet these obligations may result in a dispute with the landlord.
It is important to note that repair or reinstatement obligations can be significant, and failure to meet them can result in legal and financial consequences. Therefore, it is essential to seek legal advice to ensure that you understand your obligations under the lease agreement.
5: Arrange a Formal Handover
After the break date, you should arrange a formal handover with the landlord. This involves vacating the property and returning the keys to the landlord. You should also ensure that all obligations under the lease agreement have been met, including paying all rents and payments.
Can You Serve A Break Notice By Email?
It depends on the terms of your lease. Most leases do not allow service by email. Modern leases may allow a notice to be served by: email, hand delivery, fax, document exchange and/or by post e.g. first-class post or signed for delivery. The difficulty with serving a notice by email is which email address is considered to be the correct e-mail address for service.
Usually, there is a strict criterion for serving a break notice. In the House of Lords (now called the Supreme Court of England and Wales) Lord Hoffmann in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 provided a very important analogy on serving a break notice in accordance with the terms of the commercial lease.
Lord Hoffmann stated: if a clause in the lease requires a break notice to be given on pink paper, it is not validly exercised by giving it on blue paper, no matter how clear the intention to exercise the break notice may be.
Landlord and Tenant Dispute
In some cases, the landlord may dispute the validity of the break notice. This may be due to a failure to comply with the conditions of the break clause or a failure to serve the notice in the correct format. In such cases, it is important to seek legal advice to resolve the dispute.
If the dispute cannot be resolved amicably, it may be necessary to seek mediation or arbitration. In some cases, it may be necessary to go to court to resolve the dispute.
It is important to note that disputes with the landlord can be time-consuming and expensive. Therefore, it is essential to seek legal advice to ensure that you understand your rights and obligations under the lease agreement.
Property Dispute
If there is a property dispute between a landlord and tenant i.e. a disagreement over repair or reinstatement obligations, it is important to seek legal advice to resolve the dispute. Failure to meet these obligations may result in legal and financial consequences.
It is important to note that property disputes can be time-consuming and expensive. Therefore, it is essential to seek legal advice to ensure that you understand your rights and obligations under the lease agreement.
Conclusion
If you encounter any disputes with the landlord or a property dispute, it is important to seek legal advice to resolve the issue. Legal advice can help you understand your rights and obligations under the lease agreement and can help you avoid legal and financial consequences. Our Legal Director, Usman Anwar, is able to help you resolve your dispute.
Landlords and tenants involved in commercial lease disputes should consider whether early mediation is a possibility to negotiate a settlement. Mediation can be highly successful. For more information, read our blog Mediation and Alternative Dispute Resolution (ADR).
Contact Us
If you need help with a commercial lease dispute, you can book a Consultation Call with the team at Anwar Legal by completing the Contact Us Form or emailing us at hello@anwarlegal.co.uk.
Still not convinced? Read some of our business client’s success stories and testimonials on how they settled their business disputes using our legal service.