Laura Pyatt, commercial property solicitor at Ansons Solicitors is warning tenants under commercial leases who are finding the current economic climate tough that although many leases contain a break clause, unless the break clause is exercised correctly then the landlord may have the legal right to prevent the tenant from vacating.

This was highlighted in a recent court case where the leaseholder (Royal Bank of Scotland plc.) leased part of a property to a tenant (Hotgroup plc). The lease was for a term of 10 years with an option to break at the end of the fifth year on giving not less than nine months prior notice to the landlord. There was an additional provision in the lease which stated that a copy of the notice also needed to be served on the property management company.

The tenant served the notice on the landlord in September 2009, one month before the right to break expired. However, notice was not served on the management company until November 2009, one month after the right had expired.

When the break of the lease was rejected, the tenant went to Court to try and establish its right to break the lease.

Although the landlord had been validly served, the Court ruled that the break in the lease had not been exercised because the management company had not been validly served. The Court stated that the purpose of serving the management company was to ensure that a notice did not 'gather dust' in the landlord's offices and was brought to the attention of the person with the actual responsibility for the management of the property.

Laura Pyatt commented: “This case highlights the importance of carefully considering the terms of a break clause and the mechanics of serving notice. It is sensible for both parties and their solicitors to note the deadlines for serving notice and the break date itself.”

“The method for serving notice and any pre-conditions to the break should be reviewed carefully to ensure the notice to break the lease is valid. Tenants must ensure they have sufficient time before the break date to fulfil such pre-conditions as removing any alterations made, handing back the property in full repair and ensuring they have sufficient time to move out leaving the property in 'vacant possession'.”

“Other complications can arise if there are sub-tenants in occupation and also if the sub-tenants have made alterations.”

“There are numerous ways in which a break notice can fail and I strongly advise any tenant who is considering exercising their break clause to seek legal advice before doing so”.

For more information please contact Laura Pyatt in the commercial property department at Ansons Solicitors on 01543 267192 or email lpyatt@ansonsllp.com.