Property: Lease Slip-Ups Prove Costly; Sound Advice: Legal Consultation Can Ease Pitfalls Associated with Break Clauses

Article excerpt

One in four companies which try to exercise break clauses in their property leases get it wrong, and, as a result, lose thousands of pounds, according to a survey by law firm George Green.

In a poll of businesses in Birmingham and the Black Country, the Cradley Heath-based law firm found that failure to follow often simple conditions laid down in property leases is the most common explanation for companies' failure to extract themselves from a lease of a property which they no longer want.

'Not meeting the conditions of the clause which allowed it to terminate its lease nearly cost one business a quarter of a million pounds, as it would have been stuck in premises it no longer wanted and liable to pay rent to the end of the term of the lease,' said George Green commercial property partner Cheryl Leyser.

'Fortunately it was able to extract itself from the situation and surrender the lease, but only at some financial cost to itself to get the landlord's agreement,' she said.

'Our survey turned up another smaller business which had served its notice to break in the way it communicates with all its customers and suppliers by e-mail. The lease stipulated that the break notice had to be served by letter, so the break notice was not valid.

'This business was desperate to move to smaller and cheaper premises and for a time faced the threat of bankruptcy, until the situation was finally resolved, with the business paying a greater financial penalty than provided for in the lease' continued Ms Leyser.

The survey found that some company directors believed that merely indicating to their landlord that they are looking for alternative premises was sufficient to exercise a break notice. Once they realised this was not the case, they were forced to negotiate with their landlord. …