Break Options
Landlord and tenants often include break clauses in a lease which allow either or both parties to terminate the lease midway through the lease. Usually the break clause is for the benefit of the tenant who is nervous about committing to rent liabilities for a long period in one location.
One issue which recently came before the High Court was what happens when the right is granted to a named tenant who has sold the lease before the break date. Can the new tenant terminate the lease or is it only the named tenant? This was the situation in Gemini Press Limited v Cheryl Lindsay Parsons [2012] .
The High Court determined that the break right was “personal” and that only the named tenant could exercise it.
Important points to note arising from the judgement:
- Where a lease merely refers to the “tenant” having the right to break it, this will usually pass on to subsequent tenants.
- If the party with the benefit of a break clause is specifically named, then its right to break is personal, non-assignable and will not apply to future tenants.
- If the language used is vague, then it will depend on the facts in each case as to whether it was intended that future tenants would have the right to break.
- To avoid disputes over who is entitled to break, consider carefully the parties intentions’ and make it clear whether or not the right is personal.
If you need advice on any landlord- or tenant-related issue, please contact the Lease Advisory Team.