Break Clauses

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Depending on the individual circumstances, both landlords and tenants are sometimes reluctant to commit to a fixed term tenancy unless it includes a provision that allows the tenancy to be terminated before the expiry of the original fixed term. This type of provision is called a break clause or an option to determine. Either party may only end a fixed term tenancy before the conclusion of the term if there is a break clause in the tenancy agreement.

However, even if the tenancy does include a break clause the Housing Act 1988 prevents the court from awarding possession to a landlord until six months have elapsed from the beginning of the agreement, unless the landlord is using one of the seventeen statutory grounds for possession.

Where a tenant will not leave the property, the court will not support a landlord who wishes to recover possession within the first six months of the tenancy.

Until 28th February 1997 it was necessary that a break clause included in an assured shorthold tenancy did not give power to the landlord to bring the tenancy to an end before a minimum term of six months. Where the break clause allowed this possibility, the court might view such a tenancy as an ordinary assured tenancy with the corresponding loss of rights for the landlord. However, this restriction no longer applies to tenancies created on or after this date but as a result of the Deregulation Act 2015 a section 21 notice may not be given to the tenant within the first four months of the original tenancy where the tenancy was granted on or after the 1st October 2015.

Notice

Landlords may not use the break clause to override the statutory provisions applicable to assured and assured shorthold tenancies. The landlord will therefore be required to provide at least two months notice to determine, otherwise the break clause could be declared void. There are no corresponding obligations on the tenant in respect of assured tenancies, however; the common law requirement is just that at least four weeks notice is given.

When a break clause is included in the tenancy agreement, it is therefore common that both parties are required to give two months written notice to the other party to terminate the fixed term. This has the advantage of a more equitable notice arrangement; both parties are bound to give the same length of notice. However, in a monthly periodic tenancy only one month’s notice is required.

Surrender

If a tenancy agreement does not contain a break clause, both parties will need to agree to surrender the tenancy in order to terminate. If the landlord does not agree to the surrender, the tenant will be contractually obliged to pay rent for the entire length of the fixed term. If it is the landlord wishing to have the property back, the tenant is entitled to remain in ‘quiet enjoyment’ of the property and the landlord is obliged to follow the statutory termination provisions at the end of the term.