Case law: High Court rules further on conditional break clauses

In a recent case the High Court has handed down a judgment relating to conditional break clauses which highlights the importance of drafting clear break clauses and following the correct procedures when exercising them. 

The case of Riverside Park Limited v NHS Property Services Limited [2016] EWHC 1313 involved the Tenant entering into a lease of open-plan offices and then obtained a License to Alter from the Landlord to fit out the office with partitioning at the beginning of the term.

Five years into the term the Tenant attempted to exercise the break clause by giving the required six month notice, however, the second requirement to yield up the lease with vacant possession was not met as it was argued that the partitioning had interfered with the Landlord’s unimpeded physical enjoyment of the property. 

The Judge ruled in favour of the Landlord and the break clause had not been correctly exercised, therefore, the Tenant was liable for the rental payments for the remaining five years of the term.

This case shows the expensive results of not properly considering the conditions of a break clause, firstly at the time of drafting and secondly when exercising a break clause. Whilst each case is determined on their individual facts, this case provides a warning to Tenants who are intending to rely on a conditional break clause.

Tenants who are considering entering into a lease with a break clause or exercising a break clause should take advice as early as possible to avoid costly consequences of not being able to determine the lease.

If you have any queries relating to this article or are intending to enter into a lease and would like a review or advice on its terms please contact our Commercial Property Department on 01905 723561

Added: 01 Nov 2016 14:52

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