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Tenants: Can a break clause be used to re-gear my lease?

Feb 8, 2021

Over the last year, many landlords and tenants have been reviewing their lease arrangements with a view to reducing costs or risk. When existing lease terms are renegotiated between landlords and tenants, this is known as “re-gearing” the lease.

When landlords and tenant negotiate lease terms, both parties will be looking to benefit from any variation. Recently, we have seen tenants offering not to exercise their break option in a lease in return for a further rent-free or reduced rent period, or the removal of a rent review clause. Tenants benefit from reduced costs, whilst landlords benefit from the security of a tenant at the property for a longer period.

If you are a tenant with an upcoming break clause, it is worth considering this opportunity for re-gearing your lease. However, tenants should ensure that any formal variation to the lease is completed prior to the start of the break clause notice period, to ensure that the opportunity to break the lease is not missed if a variation to the lease is not agreed. Please click here to see our article on the issues that need to be considered when exercising a break clause.

If you do agree a variation to your lease terms, it is important that these are formally documented to ensure that they are binding on the parties.

If you have any queries about break rights and break clauses, or want to find out more about commercial leases, please contact Daniel York, Partner, in our Real Estate team, or email your query to realestate@herrington-carmichael.com; call us on 01276 686222 or use the contact form below.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

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