Commercial leases – what are you signing up for?
A business client who was looking to relocate premises recently asked for advice on whether it would be easy to bring his current commercial lease to an end by serving a notice pursuant to a break clause contained in it. The simple answer was no – the break clause in his lease required compliance with all covenants. In this situation, if there was the slightest disrepair to the property or just a few pounds of rent or service charge outstanding, the break notice would not be effective.
In a slightly surprising ruling earlier this year the High Court ruled that Marks & Spencer was entitled to a refund of rent paid after they brought a lease in London to an end on exercising a break clause (such rent being for periods after the end date of the lease). However, this judgment should be read on the circumstances of this case and in any event this case did not relate to the efficacy of the break notice. (N.B. This decision has been appealed, with the Court of Appeal set to hear it in the Spring.)
You should always seek legal advice when agreeing the terms of a lease, even if it is just to get an explanation of how clauses work and will be interpreted. Using the example given above, a relatively simple amendment to the clause at the time the lease was entered into would have made it much easier to operate the break clause. Even the most simple and seemingly unthreatening clauses can contain nasty surprises for unsuspecting tenants.
Please contact us if you need any further advice on the above. Contact Tom Swindells, Solicitor