Give tenants a break!

Posted 02/10/2012

In the current economic climate, many business tenants have tried to take advantage of so-called ‘break clauses’ in their leases. If successful, this enables them to vacate their premises before the lease has finished if they wish to move out. The problem is that many break clauses are conditional, and recent case law has highlighted situations where tenants have had to remain in premises they no longer want to occupy.

Take, for example, the condition that the tenant has paid all rent due up to the break date. If rent is payable quarterly in advance and the tenant serves a break notice to vacate on, say, 31st October, is he/she obliged to pay rent up to 31st October or the end of the quarter on 24th December?

If you think the answer is 31st October, so did the tenant in the recent case of PCE Investors v. Cancer Research UK – but the High Court disagreed and ruled that the whole of the quarter’s rent should have been paid. The condition wasn’t satisfied and the tenant therefore had to stay put.

Another potential trap is a condition that the tenant must have complied with the covenants in the lease. A case some years ago attracted publicity because the tenant was frustrated in his attempt to break the lease because he had only given the premises two coats of paint, not the required three coats! To make matters worse, the Courts have ruled that there is no duty on the landlord to point out any errors made by the tenant – silence is golden.

Needless to say, tenants should take legal advice and should instruct their lawyers to serve the break notice on their behalf – unless they want to end up in the same situation as the tenants reported above.