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In short: a break clause lets a tenant or landlord end a lease early, but only if every condition in the clause is met exactly. Courts expect strict compliance, so a missed deadline, a wrongly served notice or a small unpaid sum can leave the lease running to its full term. Ending the lease early also does not wipe out dilapidations: the landlord can still claim for the condition of the space.
This guide is for London office tenants thinking about using a break. It explains what the usual conditions mean, how dilapidations fit in, and the traps that catch tenants out. It is general information, so read it alongside your lease and take advice from a solicitor and a chartered surveyor.
What a break clause is
A break clause is a right to end the lease before its contractual expiry date. It might be a tenant-only break, a landlord-only break, or available to both. It is usually exercisable on one or more fixed dates, or after a fixed number of years, and only by serving a notice within a set period. Many break clauses also attach conditions, which are the main source of problems.
The notice: the first trap
Break notices are read strictly against the lease wording. Check each of these against your lease, not against what seems reasonable:
- The deadline. The notice usually has to be served a set number of months before the break date, and the deadline is often fixed. Late is too late.
- Who serves it. If there are several tenant companies, the clause may require all of them to serve. A notice served by only one has been held ineffective.
- Who receives it and where. The notice must go to the right party at the address the lease requires.
- How it is served. Some leases allow email, others do not. Some require a particular form. Keep proof of posting and delivery.
- It is hard to undo. A valid break notice generally cannot be withdrawn by the tenant alone, so be sure before you serve it.
Common break conditions
Typical conditions include:
- Paying the rent and other sums due. Some clauses require all rent and sums due to have been paid by the break date. In one well-known case, a tenant that paid rent only up to the break date, rather than the full quarter’s rent due in advance, did not validly end the lease, so check exactly what has to be paid and when. Interest on late payments and service charge can also count.
- Giving vacant possession. This normally means handing the space back free of people, goods and others’ interests. The Court of Appeal has said it is not generally about the physical condition of the premises, but tenant items left behind, including some internal partitions, have been held to prevent vacant possession in other cases. Do not leave anything you are not sure the landlord will accept.
- Complying with tenant covenants. Some breaks require the tenant to have complied with its lease obligations, including repair and yielding up. This is the condition that links break clauses to dilapidations.
- Paying a break premium. A fee, often expressed as a number of months’ rent, may be due by a set date.
How dilapidations fit in
There are two separate questions, and tenants often confuse them.
1. Does the break only work if you have repaired and reinstated? It depends on the wording. A clause that makes full compliance with the lease a condition is a high-risk one, because even a minor breach can invalidate the break. A clause that requires only vacant possession and payment of rent is safer. Read the exact words, and get advice if they are unclear.
2. If the break works, are you off the hook for dilapidations? Not usually. The break ends the lease, but the landlord can still serve a schedule of dilapidations and claim for breaches of the repair and yielding-up covenants. Your liability depends on the lease, and may be reduced by the Section 18 limit on repair claims (see our guide to the Section 18 cap), but reinstatement of alterations is not generally limited in that way. See who pays for dilapidations for the starting position.
Common traps
- Missing the notice window or serving to the wrong address or party.
- Underpaying something small, such as an interest charge or part of a quarter’s rent, when the clause requires everything due to be paid.
- Leaving furniture, cabling, partitions or other items in the space, so vacant possession is arguably not given.
- Starting strip-out and reinstatement too late, so works are not finished by the break date.
- Assuming the break cancels dilapidations.
- Not realising a flexible or serviced space exit has its own make-good costs. See the hidden exit cost of flexible offices.
- Serving the notice before you know what the works will cost, then finding the saving from leaving early is smaller than expected.
A practical timeline
The exact dates come from your lease, but a sensible order is:
- Well before the notice deadline: read the break clause and diary every date. Get a solicitor to confirm the conditions and whether the notice is valid as drafted.
- At the same time: ask a surveyor to look at the dilapidations exposure, and get the work priced so you can compare the cost of leaving with the cost of staying. A schedule of condition from the start of the lease, if you have one, helps.
- Before you serve: decide on the works programme, because strip-out and reinstatement need to be finished in time. See our dilapidations timeline and lease-end checklist.
- Serve the notice: exactly as the lease requires, and keep proof.
- Before the break date: finish the works, remove everything you should, pay what is due, photograph the space, and hand back the keys as the lease requires.
Where London Dilaps fits in
London Dilaps is a contractor, not a firm of solicitors or surveyors. The question of whether your break notice and conditions are valid is for a solicitor. What we can do is price the strip-out and reinstatement before you serve notice, so you know the real cost of leaving, and programme and carry out the work in time for the break date. Our strip-out and Cat A reinstatement teams work to the lease standard, and our guide to surveyors and contractors explains who does what. See our office dilapidations service, or request a free site survey and quote.
This article is general information, not legal advice. Break clauses are drafted differently and courts read the exact words, so take legal advice before serving a notice or relying on any point here.