Scott's Schedule
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If you want help on a dilapidations claim or a break clause claim please phone 0800 298 5424 and a chartered surveyor will call you back.

Lease break clauses overview

Many business owners take a lease with a break clause, thinking that if things don't go to plan, or go better than planned, then they will be able to leave the existing premises using the break clause, thereby removing the liability to have to pay rent for the property after they have a use for it.  Some may even have a break clause as part of their business plan, where they project that they will expand in five to ten years time and therefore have break clauses at these points in time.  If things are going to plan they move onto a larger property.  In our experience break clauses are not as simple as they at first seem.

Break clauses, the hidden dangers

With a break clause it is absolutely essential that you comply with the break clause fully to remove any future liability you may have with regard to rent payment and indeed the landlord carrying out the repairs for you and recharging you. 

Examples of break clauses that have gone wrong

We could give many examples of break clauses that haven't worked as they should do for the business owner/leaseholder.  All of them ultimately boil down to the same thing, that the items within the lease to instigate the break clause, often known as the compliance items, are not complied with.  Sometimes these may be oversights and sometimes they are misinterpretations.  Whichever way, the non-compliance with the compliant items of the break clause means that the leaseholder continues with the lease and therefore has an obligation to continue paying the rent.

Some examples of break clauses that went wrong

An example of a simple thing that meant a break clause was not complied with is a five year break clause that had a covenant to replace the carpets for the break clause to be instigated.  In this case the carpet was cleaned and we are told looked as new, but nevertheless wasn't new.  This meant that one of the compliance covenants for the break clauses was not complied with and therefore the break clause was not plausible.

Another example we could give is where all the building work type clauses were complied with but the keys were not returned.  Therefore the break clause wasn't enforceable. 

The break clause and business decisions

The above are extreme examples of the break clause not being complied with and normally a landlord will take a business view and generally, as long as he is able to rent the property out at a market rate and doesn't see future deterioration in the property assets and its leasing potential, he will take a business decision and consider this acceptable (but don't hold us to this, there are many landlords that will say a lease is a lease and if it isn't complied to then the break clause isn't plausible).  Generally speaking we have found that most landlords will make a business decision to force a business to carry on paying the rent when they have, for example, bought another premises, or leased another premises, have closed down ready for retirement or simply caused very bad feelings, not only with the business owner/leaseholder who gets into financial difficulties, but also with the business communities. 

Some examples of break clauses that were not enforced where important items were missed

Equally we can give you examples of break clauses that were not enforceable due to the leaseholder not taking the requirements of the break clause seriously enough, or even wrongly interpreting the requirements within the dilapidations.

Let us remind you that the dilapidations served by the landlord will give the element of the structure that doesn't meet the lease requirements and possibly give a repair method.  However, it is the leaseholder that decides the repair method that meets the dilapidations or break clause requirement.  In this particular instance the landlord's surveyor stated that the asbestos roof handles are damaged, which meant that they broke x, y, z clause of the lease and that should be replaced.  However, he had effectively overstepped the mark of his role, but understandably so, as he was trying to get the best deal for the landlord. 

In this case the leaseholder didn't challenge him or take advice from a surveyor with specialist knowledge in this area and decided replacing the damaged roof panels would simply be too expensive so didn't carry out any work, which then meant that he had not complied with the lease break clause agreement.  If he had taken advice he would have known that in that instance it would have been insufficient to have made the asbestos sheets watertight and if they had affected the appearance internally under clad them.  To a surveyor dealing in this type of work this should be basic knowledge.

If you want help on a dilapidations claim or a break clause claim please phone 0800 298 5424 and a chartered surveyor will call you back.


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