How to comply with the strict conditions required to serve a valid break clause notice for vacant possession has long been a deceptively complex area of commercial property law.
The term ‘vacant possession’ has a specific legal meaning which has been disputed in court countless times. In short, it is more complicated than simply moving out.
Now, the water has been further muddied by two conflicting court judgements which simply serve to confuse the matter further and leave the following unanswered questions:
How do these two commercial property cases heighten uncertainty?
In one, the court deemed a tenant had not complied with the break clause condition because it left items behind it shouldn’t have done when moving out. In the other, it ruled the break clause was not effective because the tenant took things away.
This illustrates that in both cases, despite contrasting circumstances, the break was not effective and the lease continued.
What exactly is a break clause?
A break clause is the ability for either party to end a lease before the agreed term.
They are common in commercial leases and can be triggered by either landlord or tenant, or indeed by both.
For a tenant, it is common for conditions to be attached to how the break clause can be exercised. A landlord will, for example, often insist that a tenant can only validly implement a break clause if they are up to date with the rent or other sums due under the lease.
Although cases that end up in court turn on individual circumstances, the message is clear – the conditions attached to break clauses may appear innocuous but in fact, have real and potentially serious consequences.
These conditions are interpreted absolutely meaning that if a tenant gets something wrong, the break is not actually triggered at all. As a result, the lease does not end and the tenant continues to be bound for the remainder of the term – or until the next break clause if there is one.
What are the implications for vacant possession break clauses?
They are becoming less common given the difficulties they pose. Specialist legal advice is key on all break clause conditions to ensure that they reflect the intention of the parties and are drafted to minimise future dispute.
Get in touch
If you need help or advice about commercial lease break clause conditions, please contact Wards Solicitors’ highly experienced Commercial Property team.