What is a Break Clause in a Commercial Lease?

A ‘break clause’ can be added to a commercial lease, allowing either the landlord, the tenant, or both parties to terminate their lease before its contractual expiry date. Not all commercial leases contain break clauses; they are optional, hence, if you want to have the added protection they provide, you may need to negotiate this as part of your new lease or lease renewal. Break clauses in commercial leases become increasingly important in times of economic uncertainty and fluctuating market conditions.

How does a ‘break clause’ work?

A break clause sets out how and when one or both parties to a commercial lease agreement may end the lease early, and can take several forms, including:

• Fixed date clauses, which allow termination on a specific date stated in the lease

• Rolling clauses, which allow termination at any time after a certain point (provided that notice is given)

• Minimum period clauses, which allow termination after an initial period, such as three or five years, within a longer lease term.

Before exercising a break clause, it is essential to ensure that the terms have been met. Typical break clause conditions include (but are not limited to):

• Payment of all rent and other sums due under the lease

• Vacant possession, meaning the premises must be empty and free of occupants or belongings

• Meeting any lease covenants, such as repair and maintenance.

Learn more about What to Look for in a Commercial Lease here.

We recommend following the guidance provided by the RICS Code for Leasing Business Premises (2020) when entering into a break clause. This promotes transparency and fairness in drafting, advising that break clauses should be clearly expressed and not unduly onerous. 

In addition, both parties should seek legal advice before agreeing to a clause. Poorly drafted or unclear wording can create uncertainty, potentially locking a tenant into unwanted premises or depriving a landlord of an early termination right.

Serving a commercial lease break notice

Most break clauses require written notice, typically between three and six months in advance. They are the optimal way to terminate a commercial lease.

Before proceeding, it is important to:

• Review the clause, including checking who is allowed to use the break clause. Sometimes, only the original tenant has this right, and it may be lost if the lease is transferred to someone else 

• Double-check the correct date for breaking the lease. This date may require calculation from the start of the lease term, so be precise 

• Make sure the party seeking to break the lease is the legal tenant named on the lease. If someone else holds the benefit but is not the legal owner, verify if they have the authority to act. 

The break notice should be drafted in line with the lease’s requirements and follow any specific rules for delivery. A commercial lease solicitor can do this for you. The lease may set out exact steps for serving the notice and what counts as valid service, including timeframes. If unsure about the landlord’s identity or address, send the notice to every possible address listed.

Common pitfalls include:

• Serving notice at the wrong address

• Using the wrong notice period

• Failing to provide vacant possession

• Leaving minor rent arrears outstanding

• Each case reinforces the importance of careful drafting and procedural accuracy.

Another common pitfall is using DIY or template leases. These can significantly expose parties to significant risk. Professional drafting ensures that the notice procedure, conditions, and timelines are clear and enforceable.

What are the pros and cons of commercial lease break clauses?

For tenants:

• Advantages - Flexibility to exit a lease agreement early if business performance declines, to relocate, or to expand elsewhere. It can also strengthen a tenant’s negotiating position when seeking rent concessions.

• Disadvantages - Risk of losing security of tenure if the clause is exercised by the landlord, or of making costly errors when serving notice.

For landlords:

• Advantage - Opportunity to regain possession for redevelopment, sale, or re-letting at a higher rent. Flexibility to adjust portfolio strategy.

• Disadvantages - Reduced investment certainty, as early termination can disrupt income forecasts and affect property value.

Learn about Your Responsibilities as a Landlord here.

Final words

Break clauses in commercial leases are mutually beneficial, if enacted correctly. For tenants, a well-drafted break clause can provide essential business protection. For landlords, it can give them much greater control of their assets. It is important that both parties ensure that their rights are clear, fair, and properly protected through careful legal drafting and timely action.

Guillaumes LLP Solicitors operate from Weybridge, Surrey, and offer legal services in a number of fields including Commercial Property and Business Disputes. Reach out to us today for assistance.

FAQs

What is a break clause in a commercial lease?

A break clause is an optional (but often recommended) provision in a commercial lease agreement that allows either the landlord, the tenant, or both to terminate a lease early, provided that all specified conditions are met and formal notice is given.

How much notice must be given to exercise a break clause?

The notice period is usually between three and six months, although it depends on the lease terms. The notice must be served exactly as required by the lease.

What happens if I fail to meet a condition of the break clause?

Not meeting even a single condition, such as paying all rent or giving vacant possession, may invalidate the break notice. The lease would then continue to its original expiry date.

Can a landlord and tenant both have break rights?

Yes. A mutual break clause allows either party to end the lease, provided that both comply with the agreed notice procedure and conditions.

Should I get legal advice from a commercial property law solicitor when entering into or exercising a break clause?

Yes. Legal advice ensures that the notice given is valid, conditions are met, and all timing and procedural requirements are correctly handled, reducing the risk of expensive disputes.