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Getting it right
For a landlord or a tenant, the break clause - giving one party to a lease the right to terminate the lease - is one of the most valuable and keenly negotiated elements to the lease. Therefore, to ensure that a break right is exercised correctly, it is most important that any conditions are strictly performed.
When considering whether to exercise a break right, the tenant will have different concerns and conditions to a landlord. A tenant who misses or fails to validly exercise a break right could potentially find itself liable to continue paying rent on a lease for a number of years, or having to pay a surrender premium. On the other hand, a landlord who is looking to remove a tenant may find itself having to attempt to negotiate a surrender, or delaying its plans e.g. to dispose or redevelop the property.
Either way, there are financial implications to exercising a break incorrectly. There have been a number of cases providing guidance and salutary lessons on the effect of getting it wrong.
Compliance with conditions
One of the key aspects to exercising a break right is to satisfy all the specified conditions in the relevant break clause in the lease. For a tenant these can include:
Time of the essence
It is implied that any time limits are "of the essence", unless the break clause states to the contrary. Care should be taken to ensure that time limits are strictly adhered to. Time being of the essence means that it is a condition of the exercise of the break that those time limits are followed, failure to do so would mean that the break right has not been properly exercised. If a notice period is to be no less than six months, then giving less would mean the notice will be invalid.
The party contemplating exercising a break right should give itself plenty of time before the deadline for serving a notice. By being fully prepared, the risk of the break notice being deemed invalid can be avoided. In addition: