commercial lease

What is a break clause in a commercial property lease?

Whether you are a landlord or tenant, it is important to understand the details of your lease contract at the beginning of a commercial lease. Break clauses are a common feature of commercial leases, but what are they and are they good or bad? Let us find out more…

What is a break clause in a lease?

A break clause in a lease is the contractual provision allowing early termination of a commercial lease under specific circumstances. It basically allows the tenant or landlord to bring the lease to an end part way through.

Do all contracts have break clauses?

No. Break clauses are not automatically featured in all commercial lease contracts. The inclusion of a break clause must be agreed by both parties and specific provision must be made in the lease setting out the terms upon which the break may be exercised, and any conditions that need to be fulfilled to ensure the break is valid.

Can I end the tenancy early without a break clause?

It may be possible for a tenant to end the lease before it reaches the end of its contractual term and outside the scope of a break clause. However, this process, known as ‘surrendering the lease’ is a complex process and will need to be carefully navigated due to the potential costs and legal implications the tenant may face. Specialist legal advice should be sought prior to considering such a course of action.

Benefits of break clause tenancy

Tenants – break clauses offer flexibility to tenants which is attractive if they want to see how the business fares at that location. They have the option to downsize / upsize or even relocate, if needed.

Landlords – providing a break option can often be used as a means of attracting tenants due to the increased flexibility this offers to them (see above).

How do break clauses work?

If your lease includes a break clause, it will normally state the exact date that either the tenant or landlord can terminate the contract early. In addition to this there will normally be a specific notice period that has to be given to exercise the break option. Furthermore, there may be specific conditions stated in the lease about how the notice needs to be served, and the party to whom the notice must be given.

It is critically important that notices must be served at the correct time, in the correct form, and to the correct party. Failure to adhere to the provisions of the break clause can mean that the option is invalidated, and the tenant could lose their right to break the lease and face the remainder of the term (or the next period of the term, if there are multiple break dates) at the property bound by the terms of the lease.

For this reason, we would always recommend that specialist legal advice is sought in the preparation and service of a break notice.

Get in touch

Whether you are a landlord or tenant, understanding the terms of a commercial property lease can feel overwhelming. We are here to ensure all parties are happy with the details and understand what they are agreeing.

‘What is a break clause?’ is a question we are often asked. Hopefully you now have a better idea of what break clauses are and how they affect a lease agreement. If you have any further questions or would like help drawing up a commercial tenancy agreement, please do not hesitate to get in touch. We will be happy to lend our expertise.