Commercial Lease Break Clauses – The Battle Goes On

Wake Smith Solicitors 28 November 2016

If a lease of commercial premises contains a clause allowing a tenant to break the lease before its end date, it is often the case that a break is conditional on the tenant providing vacant possession on the break date.

When times are hard it will generally be in the landlord’s interests to try and hold the tenant to the terms of the lease and to prevent the tenant from effectively operating a break clause and conversely it will often be in the tenant’s best interests to extract itself from the lease as soon as possible.

Thus we are currently seeing a series of cases in which the landlord has argued that the tenant has failed to comply with the break clause terms and the tenant has argued that it has.

If a break clause is conditional on the tenant providing vacant possession then the tenant must take great care to ensure that the premises are properly vacated and that all keys are returned.

In the latest case to come before the courts, the tenant served a break notice in accordance with the terms of its lease but when it purported to vacate the premises it left non-structural partitions, a photocopier, computer screens and a reception desk. Additionally the tenant failed to hand back its key fobs to the premises and failed to tell the landlord that it had in fact vacated.

Unsurprisingly the court had little difficulty in deciding that the tenant’s actions amounted to abandoning the premises rather than giving up vacant possession of them. In addition by leaving items at the premises the tenant had continued to use them and had not in fact vacated them at all.

The practical lesson if you are a landlord is to check very carefully that the tenant has actually vacated the premises and left nothing behind and that all keys have been returned on or before the break date. Conversely if you are a tenant you should take care to make sure that the premises are properly vacated and that all keys are returned. Ideally you should arrange a handover meeting with the landlord in order to give the landlord the opportunity to inspect the premises and make sure that it is vacant and to hand over the keys to the landlord but in practice the landlord might well refuse to cooperate.

For further information or advice and assistance about any dispute relating to break clauses in commercial lease please contact either Nick Lambert on 0114 224 2036 or Elizabeth Shaw on 0114 224 2041 both of whom are partners in our Property Litigation Team and both of whom have extensive experience in this area.



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