More and more pharmacists are requiring greater flexibility in their leases and, increasingly, are seeking to exercise break options particularly if they need to relocate their business (eg if a doctors’ practice moves).
Break clauses are very difficult to comply with and numerous cases highlight just how difficult it can be for tenant pharmacists to successfully break a lease.
If you are planning on terminating your pharmacy lease early, beware the potential traps and take advice early.
The terms of a break clause must be complied with strictly. Points to watch include:
THE BREAK NOTICE
You will need to serve a break notice on your landlord confirming your intention to break.
Your break notice must reflect the break clause requirements precisely. As one judge famously said “if the clause had said that the notice had to be on blue paper, it would have been no good serving it on pink paper”.
Make sure you know who your landlord is. Make checks at the Land Registry and the latest rent demand.
Check also that you have the right to break (is it a personal right?).
Serve the break notice in the way the lease requires. If your lease says service is by hand, service by post will not be good enough. Keep evidence of the method of service and request an acknowledgement of receipt.
Time is of the essence when it comes to break clauses so the notice must be served in good time.
Watch out for any pre-conditions which require compliance at the time of serving the break notice as well as at the break date.
Remember, always comply with the wording of the break clause. In a recent case a break notice was invalidly served because the lease required the notice to be written so it was given under Section 24 of the Landlord and Tenant Act 1954 and the notice did not contain those exact words.
Break clauses often contain pre-conditions to the break. It is easy to fail to comply with these conditions as any minor failure to comply will invalidate the break. Common pitfalls include:
The lease will often require the tenant to pay rent “up to” the break date. If the break date falls between two quarter days you should still pay the full quarter’s rent as rent is usually payable quarterly in advance and not for part of the relevant period (unless the lease says so).
There should be an express refund clause in the lease, as otherwise you cannot recover any overpayment made.
Look out for “all sums due” conditions
These conditions require tenants to pay all outstanding sums due under the lease. They can be difficult to comply with - you may be unaware of all of the amounts or if any sums are due. If facing one of these conditions, consider carrying out a full audit of the payment due under the lease.
In one case the tenant failed to break its lease because it had not paid the sum of just £130 in respect of default interest which had not been demanded by the landlord.
If there is any uncertainty pay all sums even if in dispute (payment can be made on a without prejudice basis) and argue about it later.
You must ensure payment reaches the landlord in cleared funds well before the deadline.
If you need to give vacant possession on the break date then start planning your exit as early as possible.
The property should be empty of people and your landlord should be able to enjoy immediate, exclusive possession, occupation and control by the end of the break date. Ensure you vacate the property, remove all items not present at the beginning of the tenancy (including rubbish) and return the keys.
Do not be tempted to return to the premises after the break date to carry out repair works etc. unless you have an express written licence from the landlord to do so. In one case the tenant failed to successfully exercise its break option because two contractors and a security guard remained on site to carry out some minor repair works after the break date.
The consequences for failing to successfully exercise a break clause can be very costly. A pharmacist can be locked into a lease for the rest of the term unless it can sell. Legal advice should always be sought early to ensure there are no problems.