Property Auditing | Breaking a Lease Part 3 | The ‘how’
Introduction
Breaking a lease is a significant decision with legal and financial implications. Tenants must ensure they comply with lease terms and allow time for rectification if needed before exercising a break option. Failing to do so may result in the landlord rejecting the break, leaving the tenant bound to the lease
This our final article in our series on Breaking a Retail Lease, explores the importance of compliance and highlights the need for the thorough review of your lease to avoid potential challenges
Our previous blogs on this topic have covered potential reasons for a break in a lease, as well as the terms in the lease contract which will inform this process. We are now going to look at what happens when the time comes – how does a successful break come about?
Compliance with Lease Obligations
When considering breaking a lease, a tenant needs to be certain that they have complied with the terms of the lease, and they must allow time to rectify things if needed before commencing the process to exercise a break option. Failure to do so will usually allow the landlord the opportunity to reject the break, in which case the tenant will be stuck with the lease for its remaining term.
During the course of the lease there may have been many changes. Landlords may have changed and managing agents may have changed, sometimes numerous times. But over the course of the entire lease, in order for your break to be valid, all of the obligations must be paid
Legal and Financial Implications
We have seen lease breaks challenged by landlords over less than £100, and consequently we recommend an audit be undertaken of the history of lease payments, regardless of how negligible the discrepancy might be. Also, as the statute of limitations for payments due under a deed (which will therefore include property leases) is 14 years rather than 6, our audit can identify issues further back than you might think. The reality is that 99+% of the time Contractus reveals monies that are due back to our client during our audit
The Break
Breaking a retail lease agreement in the UK can have legal and financial implications. It's important to consult with a legal or Property Audit professional who specialises in real estate and UK Property law to fully understand your specific situation and the terms of your lease agreement. However, here are some general steps you may consider:
Review
Carefully read through the lease agreement to understand the terms and conditions related to termination or early termination of the lease. Look for any clauses that may address breaking the lease, such as an early termination clause or a break clause
2. Identify
Some lease agreements may include a break clause, which allows either party (landlord or tenant) to terminate the lease early under certain conditions. Look for any specific conditions outlined in the break clause, such as a notice period or financial penalties
3. Communicate
Contact your landlord or their representative to discuss your intention to terminate the lease early. Explain your circumstances and reasons for wanting to break the lease. It's advisable to do this in writing to maintain a record of the communication
4. Negotiate
Explore potential options for reaching an agreement with the landlord. This may involve negotiating a mutual termination agreement or discussing alternative solutions, such as finding a new tenant to take over the lease
5. Seek advice
Consult with a legal retail property audit professional who specialises in commercial real estate to understand the legal implications and obligations associated with breaking your lease. They can provide guidance based on the specifics of your situation and help protect your interests
6. Mitigate
If you need to break the lease without a break clause or mutual agreement, you may be liable for financial penalties or future rent payments. Work with your advisors to mitigate these potential losses and explore options for minimizing your financial obligations
Remember that every lease agreement is unique, and the specific terms and conditions will determine the best course of action. It's essential to consult with a legal professional to ensure you navigate the process properly and protect your rights and interests
As we outlined at the beginning of this series, as a tenant it is important to keep lines of communication open with your landlord. No-one wants disputes to take place. So, in the early stages of negotiating or re-negotiating a lease, or if you are planning to exit early, it is best to be clear and concise with all your communications – especially regarding break clauses and what is included
Open communication, compliance with lease obligations, and careful consideration of legal and financial factors are vital when breaking a lease. Conducting a thorough lease payment audit, seeking legal advice, and engaging in productive negotiations will help tenants navigate the process effectively. By being proactive and well-informed, tenants can minimise potential disputes and ensure a smoother lease termination experience
The expertise within Contractus enables us to assist businesses with their property premises, ensuring that all payments are in order and any anomalies are dealt with expeditiously, leaving you better informed for future negotiations
How can we help you?
Visit our property services page to learn more about how we can help you.
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