Break Clauses and Notices

Question 1

General meaning

Answer 1

Allow either LL or tenant to terminate the lease early

May arise on one or more specified dates or it may be exercisable at any time during the term on a rolling basis

Similar to an option in some respect, and any conditions attached to the right must be strictly performed

Time will be of the essence in respect of any time limits in the break clause

Question 2

Ascertaining break dates

Answer 2

Matter of construction of the term:

• Run from 24 June 2005, then it EXCLUDES 24 June and the end of the 10th year of the term will be 24 June 2015
• Run from and including 24 June 2005, then it INCLUDES 24 June and the end of the term will be 23 June 2015
• begin on 24 June 2005, then it INCLUDES 24 June and the end of the 10th year of the term will be 23 June 2015

Question 3

Common conditions

Answer 3

• T must have paid all the rent due (or all payments due under the lease)
• T must have performed all of its covenants
• T must not be in material breach of its repairing covenants
• T must give vacant possession
• L must have an intention to redevelop the property

Question 4

What will the break clause specify?

Answer 4

Whether the conditions must be satisfied at the date of service or at the break date, or both

Question 5

Serving notice requirements

Answer 5

Requirements as to service of the notice will be strictly construed and must be strictly complied with - Mannai Investment co v Eagle Star - Lord Hoffmann blue paper pink paper

Question 6

What is the 2 stage test for valid service?

Answer 6

1. What is the true meaning of the notice?
2. Does the notice comply with the relevant requirements as to the notice in the relevant contract?

Notice will be invalid if served by or on the wrong person

Question 7

Method for service requirements

Answer 7

1. What are the requirements of the relevant clause?
2. Have these requirements been satisfied?

Question 8

LTA 1954 - exclusion

Answer 8

Lease granted for fixed term with a break clause (either/both LL and T) can be excluded from s24 to 28 LTA 1954

Question 9

Excluded Lease - Tenant

Answer 9

Lease will come to an end on exercise of the break clause in accordance with the terms of the lease

T only has to serve the break notice to bring the lease to an end

Question 10

Protected tenancy - Tenant

Answer 10

Can only be terminate in accordance with Part II of the LTA 54 (s24)

T’s break notice is a notice to quit for the purposes of s24 LTA 54. Will end lease.

Tenant cannot serve a s26 notice if it has served a notice to quit

Question 11

Excluded Lease - Landlord

Answer 11

LL break notice will end the lease in accordance with its terms

LL only has to serve a break notice to bring the lease to an end

Question 12

Protected tenancies - Landlord

Answer 12

LL break notice will end the contractual lease in accordance with its terms, but a statutory tenancy under Part II of the 54 Act will come into effect when the lease ends.

LL will also need to serve a notice under s25 in order to terminate the statutory tenancy

[note that a s25 notice cannot specify an earlier termination date than the date on which the tenancy could be brought to an end by a notice to quit, in other words by the break notice]