A clause in a lease allowing either party to bring the lease to an end will be strictly construed and any conditions attached to the right must be strictly performed.
In a recent case a lease contained a break clause entitling the tenant to terminate the lease on 17 March 2010. The break clause stated that: "A Break Notice shall be of no effect if ... at the Break Date any payment under this lease due to have been paid on or before that date, has not been paid..."
Interest was payable on any sum due under the lease which was paid late.
On 12 August 2009 the tenant served a break notice, and in the covering letter said that it was not in breach of the lease and noted that the landlord had not given notice of any intention to take money out of a rent deposit the tenant had paid to cover any breach.
Between 12 August 2009 and 16 March 2010, the tenant paid its rent or insurance rent late on three occasions. The landlord did not issue any demand for default interest. On 16 March 2010, the tenant sent the landlord a cheque for six months' penalty rent due on terminating the lease and the keys, and confirmed that it had vacated the premises and did not consider that it owed the landlord anything.
On 7 April 2010, the landlord wrote to the tenant saying that the break notice was not effective and that the lease had not terminated because the princely sum of about £130 interest for late payment of rent was payable and outstanding, and the landlord issued proceedings!
The court decided in favour of the landlord, pointing to there being nothing in the wording of the lease that required the landlord to serve a demand for default interest.
Even the judge acknowledged that the outcome is an extremely "harsh one" on the tenant and that the conditions attached to the break clause are "something of a trap for a tenant".
So how can you as a tenant be sure you don’t end up with the same problem, and possibly having two properties to pay for if you have relocated your business?
The best solution is to make sure before signing up to a lease that it does not contain this trap. If you use a specialist commercial property solicitor they will be aware of several ways you can address this, so that if your landlord insists on a condition that rent is paid you have complete certainty as to exactly what you must pay and sufficient time to satisfy the condition.
If you are already stuck with a lease that contains this sort of trap, you should, if exercising a right to break, carefully check if default interest is due on past arrears. It may be difficult to know exactly what default interest is due if the landlord has not issued a demand since, for example, money sent by bank transfer one day may not credit the landlord's account until a later day. If in doubt, make sure you pay more than might actually be owing given that the cost of doing so is likely to be far less than the cost to you of remaining liable under the lease!
Giles Gillingham is a Senior Commercial Property Solicitor at rhw solicitors, Guildford. He may be contacted at:
Tel: 01483 540534 Fax: 01483 301242
e-mail: