If you are cautious about the future, you may very well negotiate as part of the negotiations for the lease of the premises, that you should have a right to break the lease – just end it – either at a specific time (e.g. at the end of the third year of the term), or on a rolling basis, (e.g. at any time after the third year of the term).
The most likely is that you will have a right to break the lease on a specific date in the future. This is where problems come in.
Much of this depends on how the clause in the lease dealing with the potential break was worded – something your solicitor should be looking out for.
Almost any clause is going to say that, to exercise the break, you have to give a number of months’ prior written notice. For example, if you can break the lease on 1st January of the next year, and you have to give at least three months prior written notice, then you must have a written notice in the hands of the landlords no later than the end of September.
A surprising number of tenants forget to re-read their lease carefully, or don’t put the date in the diary, and miss the deadline for giving the notice. Once the deadline has passed, it’s passed. The landlords can just insist that you carry on as the tenant of the property.
The next potential issue is the wording of the notice itself. It has to make clear that you are breaking the lease. It can’t just express your intention or your wish. So you have to get the wording of the notice right, and that means getting your solicitors to approve it for you.
Sometimes, the wording of the break clause in the lease will include conditions which have to be met at the time you serve the notice, otherwise the notice is invalid. For instance, the lease might say that you can only serve a valid notice if your rent is paid up to date at the time. If there is such a requirement, you should check in advance with the landlords what exactly is outstanding. If you pay what you think is outstanding, but it turns out that there is some other rent due, then your notice will be invalid. Remember that service charges and insurance premiums can also be included in the definition of rent in the lease.
Assuming that you have served a valid break notice, the next important date is … No, not the date when the lease comes to an end. … The next important date is at least a month beforehand. What you have to remember is that the clause in the lease will undoubtedly contain some conditions which have to be met on the break date itself for the break to be effective. If you fail to meet those conditions, even though you’ve moved out, the landlords can tell you you’re still the tenant and then you have to move back in. You must make all the arrangements well in advance to avoid any slip-ups.
Leases sometimes say that, for the break to be effective, the tenants must have paid all rent up to date, complied with all their other obligations under the lease, and have given up vacant possession of the premises on the break date.
There are many hidden pitfalls in that reasonable-sounding list.
First, you need to check exactly what rent is outstanding, just as for the date when you serve the notice. Remember that what is due may be a quarterly advance payment for a period even beyond the break date, not an apportioned payment calculated to the break date. You may be under an obligation to make the full payment, even though once the break has proved to be effective, the landlords are bound to repay the proportion for the period after the break.
You need to be wary of the requirement to give vacant possession. It is a perfectly reasonable requirement; it is just that it poses some potential problems for you – problems you can solve by planning ahead. If you leave anything at the premises, or you’re still there the next day with one desk and a computer in the corner, then you have not given vacant possession. It’s no good saying the safe was too big to move we’ll come back tomorrow for it, or the removal van let us down. You run the risk of ruining the entire break. So the best arrangement is to get everything out and move out yourselves in advance with days to spare in case of unforeseen problems (which most problems are).
The worst condition however is the one relating to the innocent-sounding obligation to comply with your obligations under the lease. Your lease contains all sorts of obligations – for example, about when you must paint the premises, and how you must repair them – and even a minor infraction of those obligations might allow the landlords to claim you have not succeeded in breaking your lease. It doesn’t matter how stupid it might sound in human terms, but the landlord may be looking for any excuse to keep you as a tenant if it’s a bad time out there for letting property.
When you are negotiating the lease in the first place, your solicitors must delete any reference to having to comply with obligations generally. When a lease comes to an end normally, these sort of obligations form part of the subsequent discussion about what the tenant should have to pay the landlord for “dilapidations”. There is no reason why the same should not apply in a break situation.
I have only described commonly encountered conditions, but the wording in your specific lease may have other conditions which may create problems, so your solicitors should look at them very carefully with you.