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1.05.2013

Breaking up is hard to do! A practical guide to break a lease…

At the 2013 CoreNet One Big Day Conference we were lucky enough to hear from Hannah Willoughby and Victoria Blanchard at Allen & Overy LLP in their presentation entitled “Breaking up is hard to do”. The session highlighted some interesting issues regarding breaking your lease, as well as common pitfalls and recommendations when negotiating new leases. While a lot of the recommendations appeared to be common sense, Hannah and Victoria reminded us that in some situations things are not so clear-cut…

 

Drafting or serving a break notice

In the current climate landlords are likely to take every opportunity to challenge break notices, which means that extra care must be taken to make sure the terms of the lease are complied with.

In the words of Lord Hoffman in the House of Lords case of Mannai Investments v Eagle Star: “If the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to determine the lease.” See the full judgement here.

 

Satisfying Conditions Precedent

It is crucial that you are aware of any conditions precedent to the exercise of the break and comply with them.  Common examples require full payment of rent and giving up vacant possession.  Occasionally the break is dependent on full compliance with all lease terms which is a very difficult condition to comply with and will require detailed advice.

 

Paying “Rent”

In one such case (PCE Investors v Cancer Research UK) the tenant PCE Investors was unsuccessful in terminating the lease of its Lower Regent Street premises .  Although the tenant had served the break notice and vacated, they had only paid the rent up to the break date and not for the full quarter which is what the lease required.

 

Vacant Possession

This usually means ensuring that there are no people and no belongings in the property so that the landlord can enjoy the property undisturbed. It sounds simple however Hannah and Victoria assured us that this was not always the case….

In the case of NYK Logistics v Ibrend Estates (2011) the tenant in a seemingly helpful approach, left security guards in place beyond the break date without the express agreement of the landlord.  This meant that the property was not returned with vacant possession and the break was not effective.

 

Hannah and Victoria’s Top Tips:

  • Seek advice – ensure you instruct professionals.
  • Prepare – diarise your break dates and get prepared well in advance allowing for delays.
  • Vacant possession – identify any vacant possession conditions and resolve them (preferably by negotiating a surrender with the landlord).
  • Rent – identify what rent has to be paid and pay it all in advance.

 

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About the author

Manon Sel

Manon Sel

Blogging about new technology, social media marketing and Legacy Portfolio news from the USA. Get in touch with your thoughts, ideas, restaurant recommendations. @LegacyUS

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