Break Rights: A Costly Trap For Tenants

In the case of Avocet Industrial Estates LLP v Merol Ltd, a tenant's failure to pay interest of £130 resulted in it being tied-in to a further five years under its lease as a result of an ineffective break. The judge concluded that the decision was "harsh" but one that he was obliged to reach.

The Facts

The tenant had a 10-year lease with an option to break on 17 March 2010. The break option was conditional on the tenant having paid a one-off amount equivalent to six months' rent and having settled all sums due under the lease up to the break date.

Under the lease, the tenant was required to pay default interest on any sums paid late during the term. On several occasions the tenant failed to pay its rent on time and the landlord had sometimes (but not always) made demands for default interest.