Break clauses: how to negotiate them, and avoid the pitfalls

A lease is a binding commitment. You can’t simply “walk away” early unless you (a) agree a surrender, (b) assign/sublet (if allowed), or (c) exercise a break clause drafted into the lease. Getting the break right at heads-of-terms stage — and then complying strictly with the conditions — is critical.

What is a break clause?

A break clause lets the tenant, landlord, or both end a fixed-term lease early on a fixed date (e.g., year 3) or on a rolling basis after a trigger date. It’s only effective if all pre-conditions and notice requirements are met.

Typical break conditions (negotiate these up-front)

• Notice: Written notice served correctly, often 6 months in advance, with “time of the essence”.

• Payments up to date: Sometimes limited to principal rent only (preferable), but many clauses require all sums (service charge, insurance, interest, costs).

• No material breach: Risky for tenants — try to remove or narrow.

• Vacant possession / occupation: Landlords favour vacant possession (everything and everyone out); tenants often prefer vacant occupation (people gone, fittings may remain).

• Break premium: Occasionally required; consider whether it’s worth it.

Best practice: follow the RICS Code for Leasing Business Premises (2020) approach — limit pre-conditions to (1) rent paid up to date, (2) giving up occupation, (3) no continuing subleases/licences.

Serving the notice (zero-tolerance to errors)

• Read the lease: Use the exact method, address and addressees stated (including any agent/landlord change).

• Serve early: Build in buffer time; use recorded delivery/courier/process server.

• Irrevocable: Most break notices can’t be withdrawn unilaterally.

Vacant possession vs vacant occupation — what’s the risk?

• Vacant possession means premises are empty of people, chattels and contractor activity, with the tenant’s right to occupy yielded up. Even trivial items left behind can jeopardise compliance.

• Vacant occupation focuses on people/operations ceasing; less risky for tenants.

  Negotiate the wording to fit the reality of your exit and your dilapidations strategy.

Paying rent around the break date (and refunds)

To avoid default, tenants usually pay the full quarter due before the break, even if it runs past the break date, and then seek repayment under an express clause.

Important: Following leading authority, refunds are not implied — if you want pro-rata rent back after the break date, the lease must say so expressly. Make sure your break clause (or payment clause) includes a clear repayment mechanism.

Waiver of conditions

Get any waiver in writing. Don’t rely on informal conduct; disputes commonly arise where a landlord takes the keys but later alleges non-compliance.

Common pitfalls (and how to avoid them)

• Wrong service details → Serve on all named parties at all required addresses.

• Late notice → Diarise deadlines at completion; send earlier than the minimum.

• “All sums” condition → Push to rent-only; if not, audit for historic interest/admin.

• Vacant possession traps → Plan dilapidations/strip-out with a surveyor; remove loose items.

• No refund clause → Add a post-break refund of rent/charges paid in advance.

• Continuing underleases/licences → Ensure they’re validly terminated before the break date.

Practical timeline (tenant)

1. -9 to -7 months: Legal and surveyor compliance audit; strategy for dilaps/strip-out.

2. -6 months: Serve notice exactly as required.

3. -6 to -1 month: Settle arrears/interest; terminate occupiers; schedule strip-out and cleaning.

4. Break date: Hand back keys/letter of handback; meter readings; photographic record.

5. Post-break: Chase refunds expressly provided for.

Need tailored advice?

For drafting or exercising a break clause — or stress-testing one before you sign — use the contact form on this page, email info@ansons.law, or call 01543 267999 and a member of our Commercial Property Team will help.

Disclaimer: The contents of this article are for general information only and do not constitute legal advice. The law and HMRC guidance may have changed since publication. Always seek professional advice before taking action.