Early Break Clauses In Lease Renewals

Be aware of the consequences of negotiating an early break right in a renewal lease. The flexibility that this might bring will come at a cost. On a 1954 Act lease renewal, the court has power to determine the rent for the renewal lease. The Court assesses the rent for which those premises "might reasonably be expected to be let in the open market by a willing lessor" (Section 34 of the Landlord and Tenant Act 1954).

In the case of Britel Fund Trustees Limited v B&Q plc, the question of the rent was the only issue outstanding in the lease renewal. The subject premises in this case was a DIY warehouse in Tottenham. The rent paid at the end of the old lease was £776,139 pa.

The parties had agreed the new lease would have a rolling break after a short period which could be exercised on just six months' notice.