Commercial Property Solicitors Ipswich – The pitfalls when using a break notice
During times of economic recession, the ability for a tenant to terminate a commercial lease by means of a “break notice” is crucially important. If a new business is not doing as well as anticipated or if the premises are found to be too big or too small, a tenant does not want to be locked into a lease and therefore liable for rent, repairs and other commitments for a lengthy term. Most tenants expect simply to be able to serve a “break notice” to terminate the lease and to walk away on the given date. Unfortunately, matters are rarely this straightforward and a tenant can often find itself unable to escape from the lease obligations.
First, it is crucial for any break notice to be served on time, in the correct form and on the right person. Secondly, many rights to break a lease are conditional on the tenant complying with other obligations such as being up to date with payments due under the lease or being able to hand the property back to the landlord in a condition ready to re-let. It is also common for leases to contain stipulations that there must be no breaches of the lease when the break notice is served and this can be difficult to achieve. The courts generally rule that absolute compliance with all of the pre-conditions is essential or the break notice will fail.
A recent case involved a break right which allowed the tenant to terminate the lease after 14 years provided that specified time limits were observed and that the break notice was expressed to be given under Section 24(2) of the Landlord and Tenant Act 1954. In this case the tenant gave the notice within the time limits but did not state that the notice was being given under Section 24 (2). The judge concluded that it was a mandatory requirement that the notice should state it was given pursuant to Section 24(2) and it clearly did not. In this case the judge held that the non compliant notice was, however, valid. The lease had been well drafted and in the judge’s view would have included sanctions for non-compliance if section 24(2) was not referred to. The failure to refer to the statute had no effect on the landlord and the missing words were not necessary information.
This case offers a glimmer of hope to tenants who are in dispute with a landlord about the validity of a break notice. However, this recent decision should not be taken as any encouragement to ignore the strict requirements imposed by most break clauses. If in doubt, always seek professional advice at the earliest opportunity!
This article was published by the East Anglian Daily Times on 16th January 2014 in the Business section.
Commercial Property Solicitors – click here for more information on our range of services