Break Clauses In Leases

Break clauses are commonly included in commercial leases, allowing tenants to terminate their lease on a specific date during the lease term.

Prospective tenants often seek flexibility in their lease agreements, preferring not to commit to long-term leases unless the terms are exceptionally favourable. Break clauses provide this flexibility, accommodating changing business needs and premises requirements over time.

These clauses help attract tenants by offering the option to relocate or renegotiate lease terms at predetermined intervals. Depending on the lease’s overall term, break clauses typically become operable after three, five, or ten years. Tenants usually need to provide advance notice to exercise the break, initiating negotiations with the landlord, who may prefer the tenant to remain in occupancy.

When exercising the break clause, tenants often negotiate new terms, including potentially securing a rent-free period. However, if the landlord accepts the notice to break, the tenant must vacate the premises by the specified date.

Deciding whether to exercise the break clause requires careful consideration, as the outcome may not always align with the party giving notice’s desired outcome.