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Archive for May, 2008

Applying the Breaks

Break clauses in leases, particularly exercisable by the tenant, are common.  However, care is to be exercised when applying them.  Each clause will turn on its own wording which the courts will interpret strictly.

The usual format is to determine the lease on or after a particular date upon service of a notice given within a specified time frame.  Time is of the essence.  There may, additionally, be conditions attaching to the break e.g. that the tenant pay a lump sum on or before the termination date or pay all rents due up to the termination or, difficult or even near impossible to fulfil, that the tenant comply with all of its covenants pursuant to the lease.

A claim that only nominal damages are recoverable will not save a tenant who defaults in complying with conditions (see Bairstow Eves (Securities) Ltd v Ripley [1992] 32 EG 52).  Either the tenant has complied or it has not.  Hence, draftsmen add words such as “materially” or “reasonably” to “comply”.  Arguments can still arise according to the degree to which a covenant has or has not been complied with (as evidenced by Fitzroy House Epworth Street (No 1) Ltd and another v The Financial Times Ltd [2006] EWCA Civ 329) or over the terms of any settlement reached (see for instance Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2007] EWCA Civ 7).

Nevertheless, in today’s market, many a tenant will grasp the opportunity of exercising a break if only to attempt to renegotiate the terms of its existing lease.  Want to hear more?  Why not contact Hatherleigh Training?