In the current economic climate technology, media and telecommunication companies (like most other occupiers) are looking to rationalise their property requirements. This could include taking advantage of rights to terminate leases of premises which are now surplus to requirements.
However, landlords are equally anxious to ensure that they minimise as far as possible unexpected vacancies in the current market. Landlords will therefore try and frustrate the exercise of tenant's rights to terminate as far as possible.
Therefore, exercising rights to break leases can be fraught with difficulties from the tenant's point of view.
Therefore, if you as an occupier want to get out of your lease early here are a few points to be aware of:
- The service requirements of each lease can be difficult and can be complex. Sometimes notices may need to be served abroad or served in a specific way which is not obvious from the lease
- Often options to break are conditional. The conditions may not be straightforward and the legal interpretation may seem to go against common sense. The courts have always required strict compliance with any pre-condition. It may not possible to argue that a condition is trivial and non-compliance would make no practical difference to the premises or the value of the Landlord's interest. For example, in Bairstow Eves (Securities) Limited v. Ripley (1992) the tenant was required to paint the premises in the last year of the term to comply with the break conditions. The tenant did not do so as the premises had been painted 13 months from the break date. The tenant lost its right to break the lease even though the breach was of no practical significance - the tenant had painted 1 month early!
- Carefully consider when the conditions need to be complied with. Is it the date the break notice is served or on expiry of the lease at the end of the notice period?
- The wording of notices can be difficult to get right to avoid a challenge by the landlord
As break notices are often a hotly contested area, if you wish to exercise a notice to break it is worth taking legal advice in the service and preparation of the notice and in relation to what to do about complying with pre-conditions.
If the break notice is not correctly served or worded you may lose the opportunity to break the lease and your only other option would be to try and negotiate a surrender of the lease or to try to assign or underlet the premises. In current market conditions, this could be costly and difficult.
