The action list below sets out the points that need to be considered to reduce the chances of making an expensive mistake arising from a defective notice or failure to comply with any conditions. Recent case law has increasingly made this a technical area that has become a minefield for the unwary. Failure to comply with conditions can result in the Tenant remaining liable for rents and other costs until the end of the term or being on the back foot in negotiations for a surrender.
Documents and information required:
- Address of premises
- Copy of Lease
- Copy of any supplemental Lease/deed of variation
- Copy of any licence to assign or licence to alter
- Title numbers of freehold and leasehold titles
- Copy of most recent rent demand/invoice
- Copy of any correspondence concerning break notice
- Details of rent payable together with copy of payment record showing dates of payment of rent, service charge, insurance premiums and other amounts payable under the Lease
- Check break date in the Lease and period of notice that is required to be given to Landlord.
- Check that any supplemental Lease or deed of variation does not vary break provisions in Lease.
- Check identity of the Landlord – obtain official copies of freehold title to Lease to establish details of current Landlord.
- Where time allows (at least 1 month to obtain a response) serve a notice (under Section 40(3) Landlord and Tenant Act 1954) to check the identity of the Landlord and whether any intermediate Lease has been granted. If a response is received check details obtained correspond with details of Landlord stated on most recent rent demand.
- Check method of service of break notice by reviewing Lease requirements (e.g. by personal delivery, post, recorded delivery or fax) and checking any restrictions (e.g. not by email). Ascertain most reliable method of service.
Service of break notice:
- Check whether the break notice can be signed by Tenant’s solicitor as agent for the Tenant. If only the Tenant can sign, ensure that relevant authorised signatory/signatories are available to sign prior to the date that the break notice is due to be served.
- Obtain official copies of Leasehold title and check identity of Tenant to ensure that the correct party will be serving break notice.
- Check Tenant approves form of notice before service.
- Serve notice on correct competent Landlord at correct address, having checked Lease documentation for any special requirements, and ensure that minimum period of notice is provided (day of service does not necessarily count).
- Check address for service of Landlord by reviewing Lease requirements e.g. service of notice at Landlord’s registered office or other specified address.
- Obtain a receipt for service of notice where it is being served by hand.
- Top tip – keep form of notice as simple as possible to reduce chance of errors and where time allows, allow for a longer period of notice than the absolute minimum.
Check conditions that will apply to exercise of break clause:
- Vacant possession
- Payment of all rents and other amounts due
- Compliance with all other Tenant covenants
- Payment of any sum on or before exercise of break
If conditions are applicable to the exercise of the break clause:
- Ensure that all conditions will be strictly complied with by break date to achieve valid exercise of break.
- Where a condition requires vacant possession to be delivered on or before the break date, ensure that all employees, workmen and other parties in occupation will have vacated the premises. Also make sure that all Tenant’s fittings will have been removed on or before the break date (e.g demountable partitioning or other items that the Tenant has installed that are not Landlord’s fixtures).
- Where there is a condition that all rents and other sums due under the Lease have been paid, check the Tenant has paid in cleared funds on or before the break date all such rents due together with service charges, insurance premiums and other amounts due under the Lease. If payments are due in advance ensure that these will be paid in advance notwithstanding they may be payable beyond the break date.
- Check payment records and where payment has not been made on time check that any interest due or any late payments has been paid at interest rate prescribed by the Lease, whether or not demanded.
- Check the Lease to see whether there are any provisions to enable the Tenant to obtain a refund of any rents or other sums amounts paid in advance of the break date.
- Where there is a condition that that the Tenant should observe and perform all the Tenant’s covenants, check the Tenant will comply with all the Tenant’s covenants in the Lease and any licence to alter on or before the break date.
- Check that the repairing covenants and Tenant’s covenants set out in the Lease to yield up the premises in good repair will be complied with on or before the break date; also check that a duly qualified surveyor has been appointed to advise on the extent of any works necessary to comply with these covenants and that these works will be commenced and fully completed prior to the break date.
- If reinstatement of the premises is required pursuant to the requirement of any licence to alter, check with the Landlord that it wishes the Tenant to reinstate and if the response is in the affirmative or no response to the contrary is received in writing, check with the appointed surveyor the extent of the reinstatement works and that these will be completed prior to the break date.
- Check all other Tenants covenants have been strictly complied with to avoid any dispute as to the valid exercise of the break clause.
Actions on break date:
- Ensure that the premises have been cleared of all rubbish and are in a condition that complies with the Lease obligations. Arrange for the handover of all keys to the Landlord or its managing agent and check that all meters have been read before the break date.
- In no circumstances should anyone enter the premises following handover of the premises.
- Whilst these steps are essential where the exercise of a break is conditional it is best practice to take these steps even where the exercise of the break is unconditional.