Exercising tenant’s break clauses
I am often asked to advise GP clients on how to exercise break options in their leases.
Generally, landlords will want to retain a tenant for the full lease term rather than having the tenant leave early, and are known to challenge attempts to exercise a break clause if there is even the smallest failure by a tenant to comply with relevant requirements under the lease. This article outlines at a high level seven points to help you plan for – and maximise your chances of success of – achieving an early exit.
Tip 1 – Who benefits from the break
Consider the break clause in your lease carefully. Does it permit the landlord, or the tenant (or both) to terminate the lease? The below assumes that your lease permits the tenant to exercise a right to terminate the lease early.
The current legal tenant under the lease is generally the person who needs to exercise the break, although sometimes the break can be personal to the original GPs at the practice (meaning that, if other GPs have taken over the lease, the break right may no longer apply). This person might be you, but equally it could be another GP at the practice or the GP partnership collectively – meaning that you are reliant on others for service of the break notice.
All GPs at the practice might jointly be tenants, in which case they would all most likely need to serve the break notice. It is common for GP practices to have failed to arrange for the legal interest in the lease to be transferred when partners retire or pass away, which can result in those GPs who are currently operating a practice not being the ones who actually hold the lease. This can bring up questions about how to serve an effective break notice.
If the incorrect person(s) serve the break notice, it will not operate successfully and the landlord could hold you to the terms of the lease until its expiry.
Tip 2 – When to exercise the break
Consider the break date in your lease. It might prescribe that the lease can be terminated at any time, at any time after a certain date or on fixed date(s). It might be tricky to deduce the break date. Often, the lease specifies the break date to be a certain number of years from the term commencement date. For example, a break date could be expressed to be “the fifth anniversary of the term commencement date”.
Tip 3 – How much notice
The lease will specify how much notice you need to give the landlord to operate the break prior to the break date. It might be an exact time period (such as “three months’ notice”) or it might specify a minimum notice period (such as “at least 6 months’ notice”). The notice must be served in accordance with the methods prescribed in the lease, as such as personal service or recorded post. There might be provisions in the lease governing how long a notice will take until it is deemed to be served or received by your landlord, which may mean that the notice has to be sent or received some days before the break date.
It is crucial that your break notice is served in time. If you miss the deadline, the landlord can compel you to stay in the premises for the full term of the lease.
Tip 4 – The written notice
You need to ensure that your break notice is written to incorporate the exact requirements of the lease. An extreme example would be that if the break clause prescribes for the break notice to be on pink paper, a notice sent on white paper will be invalid.
Tip 5 – On whom to serve
The break notice should be served on your landlord – which is easier said than done. You might need to check HM Land Registry records (via your solicitor) and the latest rent demands, and identify the appropriate address to where the notice is to be sent.
Sometimes, the landlord’s agent will be authorised to accept service of the break notice. You would need to check this point carefully as agents often hold themselves out as having sufficient authority when in fact they do not. If you serve your notice on the incorrect person, the break will not operate successfully.
Once served, you cannot change your mind and withdraw the notice, even if your landlord consents to the withdrawal.
Tip 6 – Break conditions
If the break has conditions attached to it, these need to be complied with exactly or the break will not take effect. Consider whether these conditions need to be satisfied upon service of the break notice or on the actual break date.
A common break condition is to give vacant possession of the premises: this is a complex and demanding requirement involving both factual and legal analysis.
Conditions often relate to the payments of monies, such as payment of the “the Annual Rent”, “all Rents due under the lease” or “all payments due under the lease”. Any shortfall in payment would render the break ineffective. Many practices fall into the trap of, instead of paying a full quarter’s rent, only paying that proportion of the next instalment of rent that covers the period up to the break date – which will often invalidate the break.
The break might be expressed to take effect only if there are no subsisting occupational interests. This condition means that if, for example, a third party GP is occupying a particular clinic room at your practice or you are sharing occupation with another practice on the break date, the break would not take effect.
Tip 7 – Break Date
By the break date, you should vacate the premises and give the keys back to the landlord. In advance of this date, it makes sense to contact the landlord or its agents to confirm handover arrangements. Do not make any more payments under the lease or it will frustrate the break. You might want to think about consequential matters, such as whether you can get back any sums already paid but which relate to the period after the break date, and your dilapidations liability.
As this article highlights, the exercise of a break clause is complicated. If this is something that you are considering, we would advise that you seek legal advice as early as possible as there can be huge practical and financial consequences if you trigger the break ineffectively. We can also advise on how to de-risk the situation, namely by agreeing an early surrender with your landlord.
First published in GP Business, May 2025.
Stephanie Trompeter is an associate in our corporate commercial team. If you have any questions about any of the issues covered in this article, or need legal advice, please get in touch with the team today.