A break clause may only be exercised if any conditions attached to it have been satisfied.

These can include:-

  • The tenant must have paid all the rent (or all payments due under the lease).
  • The tenant must have performed all its covenants.
  • The tenant must not be in material breach of its repairing covenants.
  • The tenant must give vacant possession.

The break clause should specify whether the conditions must be satisfied at the date of service of the break notice or at the break date, or both.

Compliance with terms of break clause

A break clause will be strictly construed and any conditions attached to the right must be strictly performed. In particular, time will be of the essence in respect of the time limits in the clause.

An absolute condition that the tenant has paid the rent and performed and observed its covenants and conditions, will prevent the tenant from exercising the break clause if there is a subsisting breach of covenant or condition at the relevant time, no matter how trivial the breach.

Condition requiring vacant possession

A break clause will often contain a condition that the tenant must give vacant possession. This may be implicit anyway in an obligation to perform the tenant’s covenants in the lease, which would include a covenant to yield up at the end of the term.

Chattels are items that are not fixtures and a tenant is generally obliged to remove its chattels from the property at the end of the term.

Tenant’s fixtures comprise chattels attached to the land by the tenant (or a predecessor) for the purposes of its trade or business and which are capable of physical removal without causing substantial damage to the land and without the chattels losing their essential utility as a result of the removal. They may be removed by the tenant during the term but not after it has come to an end (subject to contrary agreement).

The two key factors for determining whether a chattel has become a fixture, are:

  • The extent to which the item is annexed to the land.
  • The purpose for which the item was brought onto and annexed to the land.

It is worth noting that the Lease Code 2007, which is a voluntary code, states that a break right should not be conditional upon vacant possession being given. It explains that disputes about the state of the premises, or what has been removed or left behind, should be settled after the break right has been exercised. The rationale is that a breach of covenant by the tenant should not prevent the break clause being exercised, as either party will still be able to claim damages from the other in respect of any breach of covenant.

Rob Cooke is a director at Lupton Fawcett LLP and specialises in  Commercial Property Disputes. He can be contacted on rob.cooke@luptonfawcett.law or 0114 2766607.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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