Break clauses in leases

by Practical Law Property

A practice note that considers the content and effect of break clauses in fixed-term leases, focusing primarily on commercial leases in England and Wales. This note outlines the function of a break right for both landlords and tenants and addresses critical considerations for drafting, negotiating, and exercising a break clause. It explores the requirement for strict compliance with conditions relating to matters such as rent payments, performance of covenants, and delivering vacant possession, highlighting the governing case law. The guidance analyses common pitfalls when serving a break notice, including the significant and often misunderstood legal consequences of purporting to withdraw a notice. This note also examines the interaction between break clauses and other key lease provisions, such as rent review and underletting clauses, as well as the crucial impact of the Landlord and Tenant Act 1954 (LTA 1954). Important financial implications are also covered, including the rules on the apportionment of rent paid in advance following the Supreme Court's decision in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2015] UKSC 72.