As well as having practiced as a property lawyer since 2001 I’ve also been an active property investor and developer and over the years I’ve come across many different scenarios that potentially affect all property professionals so over the next few weeks I’m going to be sharing a few of my musings and experiences on what I hope are topical and useful issues for your business. While every situation is different, and this is not legal advice, I’ll throw in some general legal input where I think it helps and I’d be delighted if you want to connect to me on LinkedIn and share your views and personal experiences.
So, where do we start. Well, the daily news seems to be a good place and as you will all have seen a quick glance at any news at the moment is becoming more depressing by the day, runs on the pound, financial markets in lockdown and that’s just for starters so now is the time to start thinking about the issues that could rise to the fore should this trend continue and one that immediately came into my mind is how to exit a lease. This is relevant to both landlords and tenants and as a quick recap a lease can end by the term ending, by being forfeited, surrendered or by exercise of a break and in this my first bite sized blog I’m going to give you a quick recap on how to exercise a break option in a lease.
The starting point for both landlords and tenants is to check what the lease says as a well drafted lease will clearly set out what both parties need to do and when. On entering into or acquiring a lease where there is a break the very first thing to do is to diarise the break date plus the date you need to serve notice to exercise the break by plus, most crucially, the date well before the date you need to serve notice by to minimise the risk it is overlooked. It’s a bit like having several alarm clocks set a few minutes apart, I cannot have too many reminders on key dates in leases. You would be amazed the number of times this is overlooked, resulting in panicked calls and efforts to serve the notice on the last day the most notable involved an impromptu trip to Jersey! The timing of a break is key here as virtually all breaks are subject to the “time is of the essence” provision which just means the break date is the exact date and nothing else so it you miss it then, well you miss it and the opportunity to break is gone.
The next step is to check the notice provisions of your lease to see how the break notice needs to be served. I take the view that you serve on the landlord at every address you have for them as always better to serve on more than you need to rather than less. Also the impromptu Jersey trip taught me to look where a landlord is based too, while I did manage to get the notice served it was far more stressful than it should have been had we been told earlier. If you do have overseas tenants, and in older leases you may well not have a UK service address, this is a factor and its worth using a process server to make sure the notice is received. While it is cost, this is likely to be far less than the cost of missing the break and the lease continuing.
Lastly, you need to check if there are any conditions that need to be satisfied for the break to operate. For any landlords out there, when drafting the break you want to include as many conditions as you can and, as you’ve probably guessed, the exact opposite is true for tenants. Usually the compromise on this negotiation is that the break is conditional on the tenant having paid the annual rent and any service charge demanded and the tenant giving vacant possession of the property. The first condition is straightforward, and a good lease will also contain the proviso that service charge needs to have been demanded and not disputed. It goes without saying that disputes must be genuine but having this proviso will protect a tenant who has a real issue with service charge and a landlord who has a less than reasonable tenant.
The second condition, giving vacant possession, is much less clear and, not surprisingly, has been the subject of considerable litigation over the years and can be a potential minefield. The basic rule here for anything in the property is ‘if in doubt take it out’ and this would include any personal belongings a tenant has, any demountable partitioning they have installed and any works they have done unless it’s clear and in writing in the lease or any document under it such as a fit-out licence that removal is not required. Most common examples of items that a landlord can agree a tenant can leave are extensions or mezzanines but can include anything although generally it will be items the tenant has installed that improve the property that a landlord wants to keep.
And that concludes my first whistle stop blog post in this series, if your business has a break or you are looking at granting or taking a lease with a break then get in touch by email or on 01494 521301.