Search

Have a break, have a… dispute with your landlord costing thousands

PUBLISHED: 06:00 20 June 2018

Damien Pitts of Steeles Solicitors. Picture: submitted

Damien Pitts of Steeles Solicitors. Picture: submitted

Archant

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.

Check the small print of a business lease agreement. Picture: Getty Images.Check the small print of a business lease agreement. Picture: Getty Images.

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.

Ensure any break terms are clear before the lease begins.
   Picture Flamingo Photography/Getty ImagesEnsure any break terms are clear before the lease begins. Picture Flamingo Photography/Getty Images

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 dpitts@steeleslaw.co.uk or 01603 598000.

Search hundreds of local jobs at Jobs24

$render.recurse($ctx, '$content.code.value')
Management Jobs

Show Job Lists

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy

Insight

It’s been a busy week in the business world, so we’ve rounded up some of our biggest and most interesting stories that may have gone under the radar - and you can test your knowledge of both national and East Anglian stories in this week’s Biz Quiz.

Jamie Brown explains how Digital Decoded can help SMEs navigate the mire of marketing products.

Women in Business

cover

Enjoy the
Women in Business
digital edition

Read

Celebrating Success

cover

Enjoy the
Celebrating Success
digital edition

Read

Green 100

cover

Enjoy the Green 100
digital edition

Read

Meet the Team

Mark Shields

Business Editor

|

Chris Hill

Agricultural and Farming Editor

|

Business Most Read

Awards

Norfolk Future 50 EDP Business Awards Green 100