Break clause update – Canonical UK Ltd

Challenging rent terms in your lease: Canonical UK Ltd. v TST Millbank LLC

In this case a tenant sought to break a lease, which clearly specified (as is normal practice) that for a break notice to be valid, all the rents payable under the lease had be paid up to the date of the break.

It also included a term that the tenant was required to pay one month’s rent as a ‘reverse premium’ payable on top of the rent. This sum had to be paid ‘on or before the break date’.

The law is quite clear that where a tenant decides to pay only the rent ‘due’ until the break date, this may render the election to break the lease invalid.

In June 2012, the landlord sent the tenant a rent demand for the quarter commencing 24 June 2012. In February 2012, the tenant had issued a notice terminating the lease on 22 August 2012.

The tenant paid the rent as invoiced, but did not pay the additional one month’s rent.  The landlord argued that the tenant had breached the terms of the lease because it had not paid the additional month’s rent when it issued the notice to break the lease. Furthermore, since the tenant had not raised its intention to break the lease, when the invoice was paid, the landlord had no way to identify that part of the payment was meant to cover the reverse premium. Accordingly, the landlord argued that the notice to break the lease was invalid. The court accepted the landlord’s argument.

If you are considering terminating a lease or renewing / challenging a term, you must seek advice. You could otherwise end up stuck in a long term arrangement you cannot afford, do not want or could end up in costly litigation.

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