10th February 2011

Tenants’ Break Options

In the present economic climate it is not uncommon to find that tenants enter into lease transactions in circumstances where they are given the right to terminate the lease before the end of its contracted duration or indeed to extend the duration of the lease beyond the period of occupation originally contemplated in the lease. Normally the lease will provide that options such as these are to be exercised by the tenant serving notice upon the landlord of the tenant’s intention to exercise such option.

In situations such as this it is essential that care is taken when serving such a notice to ensure that the notice is fully compliant with the terms of the lease. Quite frequently a lease will specify a strict time limit for service of the option notice which must be met if the option is to be successfully exercised. The tenant would be well advised to diarise in advance the date upon which service of the notice is to be made to ensure that it is not overlooked.

When serving the notice the tenant needs to consider carefully the terms of the lease before issuing the notice. The lease should specify the period of notice required,  the address to which the notice is to be served and the method by which the notice is to be served. In particular it is essential that the party serving the notice ensures that service is effected upon the correct recipient and this is frequently an issue where the landlord has disposed of the leased property to a third party since granting the lease.

The consequences of failing to validly serve a notice exercising a break option can be catastrophic to a tenant and may well result in the tenant losing the right to exercise the option and being contractually committed to continuing to occupy the leased property and meet the costs of the rent and other outgoings until the expiry date of the lease. It is therefore in the tenant’s best interest to ensure that they are correctly advised on the matter and that the notice is served appropriately.

If you require any further information in connection with the above, please contact Ken Scott whose e mail address is ken.scott@blackadders.co.uk

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