Don’t serve a break notice (unless you mean it!)
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Don’t serve a break notice (unless you mean it!)
The recent blog posted on this site concerning the opportunities available to landlords and tenants to renegotiate and re-gear leases will in some instances interact with break clause which tenants (or in some cases landlords) may have the benefit of. Either party may threaten to exercise the break clause unless improved lease terms can be negotiated.
Threatening to exercise a break clause is however (in law at least) very different from actually exercising the break.
Once a break notice has been served it cannot be unilaterally withdrawn. Whilst both the landlord and tenant can agree to the notice being retracted that will then give rise to the grant of a new tenancy and a host of potential problems including the following:
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The new lease will not be contracted out (as the old lease may have been) from Part 2 of the Landlord & Tenant Act 1954.
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Any guarantor will be released.
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A liability to stamp duty land tax liability may in some circumstances arise.
When seeking to enhance or renegotiate the position of either a landlord or a tenant, it is key to ensure that all of the implications of the actions of either parties are understood. In particular, steps shouldn’t be taken to serve a break notice unless the party proposing to do so, is entirely clear and comfortable with the implications of its actions.
If you wish to discuss any of the points raised in this blog please contact Mark Withers at mark.withers@parissmith.co.uk.
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