Q I am negotiating a 5 year lease of a shop with the landlord and somebody mentioned to me that I should see if I can include a "break clause". Is this a good idea?
A Yes. Rent is one of the largest expenses of most businesses and a break clause allows a tenant to terminate that expense early if necessary (for example if the business fails or is struggling or the tenant's circumstances change). It gives the flexibility and certainty to expand or contract a business and therefore is highly desirable from a tenant's point of view.
However, it is a mistake to think that the work is done by signing a lease with the desired break clause. That is only the beginning. You also need to be aware that:
- Break clauses are usually conditional on the tenant doing certain things.
- Those 'things' can be time consuming, expensive and require a considerable degree of planning and management.
- Failure to do those things will mean no break and ongoing liability until the lease ends.
Break clauses also often contain strict time limits regarding their operation and if these limits are missed the right to break will be lost. Break clauses therefore need careful attention and monitoring and their implementation should be seen as an integral part of your business planning.
For advice and assistance in connection with business or commercial leases please contact Keith Swan on 0808 231 7043.
