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Landlord and Tenant: Break Clauses in Leases

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A recent High Court decision will have implications for tenants who are considering exercising a break clause in an existing lease.

The court held that a tenant owed default interest on late payments under a lease, even though the landlord had not issued any demand for default interest. As the tenant had not made all payments due under the lease as required by the break clause, its right to break the lease had not been validly exercised. The tenant remained bound for the remainder of the lease term, despite the amount of default interest being negligible.

The wording relating to the payment of default interest is commonly seen in existing leases. Therefore, when exercising a right to break in an existing lease, a tenant should check whether default interest may be due on past arrears.

This checklist highlights the practical issues a tenant should consider before exercising a break clause.

For further information, please contact our Commercial Property Team.