Business beat LEASE BREAKS: TOP TIPS AND TRAPS
with both contractual break conditions and any particular service provisions, is required for lease breaks to be effective.
TOP TIPS AND TRAPS FOR THE UNWARY
In times of economic uncertainty, many businesses look to rid themselves of surplus property to reduce rental liabilities. The pandemic, and the consequential surge in home- and flexible- working, has also demonstrated that many businesses can operate effectively with much less rented commercial space
40 JUNE 2021
nce a decision has been made to bring a commercial lease to an end, the failure to serve a valid break notice can have drastic consequences. The business may lose the opportunity to break the lease and may therefore remain liable and tied into the property with long-term, unwanted commitments. And the point was well made in the leading case on the subject, Mannai Investment v Eagle Star in 1997. In the ruling, Lord Hoffmann famously said: “If the [termination] clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate.” In doing so he vividly explained that strict compliance,
As a result, very careful consideration must always be given to the exercise of any break. The starting point when serving a break notice must always be to examine the lease and the contractual provisions which set out the options; any conditions which must be complied with; and any particular requirements for service.
WHEN? The question of when a break notice can be served is very important, especially if the option is a one-off or ‘once and for all’ break (as opposed to a ‘rolling break’). There are then three dates to determine: the break date; the date by which notice must be served; and the date by which the notice must actually be issued. If any of these are calculated incorrectly then there is a real risk that the break notice will not be valid, and the lease will continue.