Some may regard the preparation and service of a break notice as an administrative task and easily undertaken. However, the consequences of a break notice being ineffective can be highly significant. This is the case where, for example, the lease is not broken and continues for many years until its expiry, with attendant lease liabilities – rent, service charges, business rates and so forth – having to be satisfied. We have seen examples where the ongoing liabilities have amounted to some millions and regularly into the hundreds of thousands… ouch!
The courts view a tenant exercising a lease break as a privilege and there must be strict compliance with the lease break provisions for the break to be upheld as effective. There is little or no leeway for errors to be ignored. So, is it that difficult to prepare and serve a break notice?
Preparing a break notice
The starting point is to carefully review the terms of the lease containing the break provision, including the break clause, service of notices clause, parties and their stated addresses and so on. The party wishing to exercise the lease break must comply in all respects with what is stated in the break clause and other provisions in the lease.
This compliance can cover a variety of conditions, so it’s best to be aware of the forms these can take. For example, what the break date is, how much prior notice has to be given, whether there are there any conditions that have to be satisfied by the tenant before a break notice can be served – and whether these been satisfied or if there sufficient time to do so. Similarly, one should note what type of notice has to be given – is one prescribed and attached to the lease – and if it needs to provide certain information and be served on particular entities and in a particular way. Every detail must be considered – if the break clause requires the break notice to be on pink paper, this should be adhered to.
Proper checks need to be undertaken of the current landlord and tenant and any other party who needs to receive the notice. This will include company house searches, land registry searches, check of rental demands for parties and addresses stated, all to extract accurate information about the relevant parties. This includes current names, their current addresses and whether they still have the property interest.
Serving a break notice
The break notice needs to be served in accordance with the service provisions contained in the lease and these need to be strictly adhered to in respect of who has to be served, where, and the method of service. Overseas service arises not infrequently, and time needs to be available to achieve this.
Where the service provisions permit postal and by hand deliveries, given the current and increasing difficulties experienced with postal deliveries, there has been an increasing use of by hand deliveries using process servers to ensure certainty of delivery and evidence of when it was served.
Given the importance of the break notice being served properly and in accordance with the lease, and the severe adverse consequences if this is not achieved, the focus is on achieving certainty and there are systems and processes in place for this. Our advice would be to approach your legal team some weeks before the break notice needs to be served to ensure there is sufficient time available to achieve an effective break notice being served. Ideally this would be between two to three months; or possibly six to 12 months if a condition has to be satisfied before the break notice can be served.
A sensible approach would be to ask your legal advisors to review the break provisions about 12 months before the break date. This is so they can highlight any particular issues that might have to be dealt with before service of the notice and before the break date – especially satisfaction of a condition before service of the notice and indeed between that point and the break date.
They can also ensure there is sufficient time to do so, especially if any building works are required. Time soon runs away dealing with assessing what works are required, preparing a specification for those works, dealing with a tender process for the works, a builder then being available to undertake the works and an allowance made for any overrun.
Furthermore, the service of the break notice is often not only the first step that needs to be taken for an effective break of the lease. It is more common than not that various conditions need to be satisfied by the break date for the break to be effective. It is also important that such conditions are identified, what steps need to be taken to satisfy the conditions and by when, and that there is sufficient time to do so.
For example, a condition that the tenant needs to deliver vacant possession of the premises by the break date can be fraught with difficulties concerning what works are required to achieve this – it is not just limited to moving out. Time will be required to carry out potential works, especially if alterations have been made to the premises. Advice on this can be obtained.
More broadly, the points made above on the preparation and service of break notices will also be applicable to other notices to be served in respect of the lease. We regularly act for many tenants and landlords dealing with the service of lease notices; and also defending or attacking the validity of notices, where something has gone wrong.