Have a break, have a… dispute with your landlord costing thousands
PUBLISHED: 06:00 20 June 2018
The exercise of break in a commercial lease is a fertile source of litigation as there is much which can go wrong with the apparently simple task of serving a break notice.
A tenant must give the break notice in exact accordance with the conditions of the break clause, so if the break clause states that the tenant must give the break notice on blue paper then a break notice given on pink paper will not suffice even though the landlord understands the tenant is asserting its right to terminate the lease.
It is important, therefore, that a break clause is unambiguous so a tenant knows exactly what it needs to do to validly break the lease.
The recent case of Goldman Sachs International v Procession House Trustee Ltd & another (2018) decided last month highlights how an ambiguous break clause can cause problems for the parties. The clause in question required Goldman Sachs to “On the expiration of [the break notice] the term shall cease and determine (and the tenant shall yield up the premises in accordance with clause 11 and with full vacant possession).”
Clause 11 required the tenant to remove any alterations and reinstate the premises to their original layout. It was unclear from the drafting whether Goldman Sachs has to remove any alterations and reinstate the premises as a precondition of the break clause. If Goldman Sachs failed to reinstate the premises then could the landlord claim there had been a failure to comply with the preconditions of the break? This was the question the Court was asked to answer.
The High Court decided that the requirement for Goldman Sachs to reinstate the premises was not a precondition of the break. The use of brackets indicated that the reference to clause 11 was meant as a reminder of what would occur on the break date, rather then creating an obligation which Goldman Sachs had to meet on the break date to validly terminate the lease.
The reasoning behind the judge’s decision was that the parties needed to have certainty over whether the break had been exercised or not.
If you are commercial tenant seeking to exercise a break right, then it is crucial to seek early legal advice (we suggest you diarise at least 2 years before the break date) to ensure that you do not slip up on the many traps which can be sprung on the unwary in validly exercising the right to break a lease.
For more guidance, please take a look at our full article: http://www.steeleslaw.co.uk/have-a-break-have-a-dispute-with-your-landlord-costing-thousands/
If you want to learn more about break clauses, please contact Damian Pitts on firstname.lastname@example.org or 01603 598000.