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The Law Society - Conveyancing

13

Jan

2017

Commercial Leases Break Clauses

For commercial leases, it is very important to take great care in exercising a break clause including when Notice must be given, how the Notice has to be served, on whom and by whom:-

 

When:

If the lease provides for a one-off break, then you should check:-

(i)        The break date

(ii)       The date by which Notice must be served (being the date the Notice is received by the other side)

(iii)      The date by which the Notice must actually be issued

Note that “service” means receipt by the other side.

Check whether the Lease requires actual delivery or whether there are deemed service provisions.

 

How:

You need to check the Lease carefully to see if it contains the specific method for serving Notice or are there general provisions in the Lease for service of notice. If there are contractual requirements in the Lease, then these must be fully complied with.

The commercial Lease may incorporate Section 196 of the Law and Property Act 1925, which means that the Landlord or Tenant can rely on deemed service if they use one of the methods provided for under the Act, which means that Notice will be deemed to have been served and valid even if the recipient did not actually receive it. If there is no specific provision regarding service in the Lease, then Section 196 will apply. Be aware if you are relying on service under Section 196 that this includes service by registered post unless Notice is returned to the sender undelivered, which does leave open an element of uncertainty.

 

Who:

The current Landlord and Tenant may not be the original parties to the Lease and the Title may not be registered at the Land Registry or the Landlord and Tenant may not be based in the UK. If the title is registered then rely on up-to-date Office Copy Entries and the recipient is more straightforward. If the property has recently been sold, check that the new buyer has been registered. If either side is a company, then search Companies House for the latest name.  Check to see if there are multiple Landlords or Tenants, in which case all parties need to be served – all collectively and also individually.

If the Lease provides for a conditional break clause, any condition must be complied with absolutely, including full payment of all outstanding monies to the penny. If it is a condition of the Lease that all rent must be paid up to date, this may include service charge and/or insurance rent if the Lease so provides, but these are to be collected as rent, in which case can these sums be calculated accurately and does the Lease provide that the sums have fallen due or have actually been demanded by the Landlord?  Repairing obligations are absolute, but the Landlord is not obliged to confirm the work he expects the Tenant to carry out and therefore there would be uncertainty as to whether the Tenant has fully complied with the repairing obligations.  Vacant possession must be given.

 

Our team of experienced lawyers are available to assist in all Landlord and Tenant, Commercial and Residential lease issues, and other property matters.  Please contact Judith Bleetman at our Church Hill Road office in the first instance.

 

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