With tenants looking for ways to ease the burden of their leases, some are using impending break options as a means of forcing a landlord to agree to concessions in the lease; if the landlord does not agree, the tenant will serve the notice and leave the landlord with an empty property.
If the parties do then agree to variations, these may not have been formally documented by the time the deadline to exercise the option arrives. In such cases, a tenant may be tempted to serve the notice, so as to keep the landlord on its toes, with the intention of withdrawing the notice once completion does take place. Unfortunately, this is not possible. The notice cannot be withdrawn. If the tenant does wish to remain at the property after the break date, it will need the landlord’s cooperation.
What if the break option is conditional and the tenant decides to avoid complying with the conditions so as to void the exercise of the break?
The risk here is that it is always open to the landlord to waive the conditions at any time, resulting in the break option remaining valid.
If the landlord does decide that the tenant can remain in the property, the situation is not as simple as the parties merely discarding the notice and behaving as if it had never been served. Legally, once the notice is served, the lease will come to an end and if the tenant remains in occupation after the break date, a new deemed lease will come into existence on the day after the break date.
Various unwanted consequences may follow, for example:
One piece of good news is that HM Revenue and Customs have stated that no stamp duty land tax will be payable on the new deemed lease.
The law governing this area derives from two cases in the 1870s relating to situations where the break date had passed. Solicitors therefore argue that if the break date has not yet passed, the parties can agree in the deed of variation that either of them can unilaterally withdraw the break notice and the current lease will therefore not terminate on the break date. However, this has not been tested in the courts and so is open to challenge.
So although there are possible ways around the problem, the moral of the story has to be to avoid serving a break notice unless you really mean it. And if you are the recipient of the break notice, bear in mind that despite appearances, this leaves you with the upper hand.
This article is general comment.
You must not act or decide not to act without receiving legal advice specific to your circumstances.
© Copyright 2010 Burt Brill and Cardens Solicitors Brighton, Sussex