This is currently a popular question. On the face of it the answer is simple, but get it wrong and it may prove very costly. Commercial property specialist, Caroline Entwistle, explain why.Caroline may currently be contacted by email or by completing the contact form at the foot of this page. |
Visit our COVID-19 Hub
Yes, but…
The short answer is yes – provided a tenant has a contractual right in the lease to determine it (called a break clause) then it can be activated now just as at any other time.
We are regularly asked to give advice on the operation of a break clause and exactly how to go about it. The advice is always broadly similar, but does vary depending on the precise terms of the clause in each lease. However, there is one constant found in almost all such clauses – an obligation on the tenant to have “paid all rents due” before the clause can be operated successfully.
The term “rents” will include all sums due under the lease, in particular the annual rent and the service charge, so it is critical that all sums are paid on time and in keeping with the requirements contained in the lease.
Emergency legislation
At the time of writing, the government has recently passed emergency legislation preventing a landlord of commercial property from taking forfeiture action against a tenant up to and including 30 June 2020. This date may be extended. The result is that many tenants have failed to pay all or some of their rent which would have been due on the quarter date of 25 March 2020.
If you are a tenant who has paid only some or none of the rent, or other sums due (such as service charge) and are looking to operate a break clause you should ensure that all sums are paid to date as soon as possible, and preferably before serving notice. Failure to have paid all your rents and comply strictly with all conditions under the break clause will render your notice to the landlord invalid, with the result that the lease will continue, together with all of the obligations it imposes.
Costly
Remember, unless the lease contains a rolling right to break, then the break clause will be a one-off and you may lose the right to break altogether if you do not comply with all of the conditions. Clearly, particularly in the current environment, that could prove costly. For that reason, we strongly advise you to take legal advice at the earliest opportunity and certainly before serving notice.