Understanding Break Clauses in Commercial Leases

November 17, 2025

Break clauses are a key feature in many commercial leases, giving flexibility to both landlords and tenants. This article explains what they are, why they matter, and what you need to know to use them effectively.

What is a Break Clause in a Commercial Lease?

A break clause allows a landlord or tenant (or both) to end a lease early (i.e. in advance of the contractual end date of the term of the Lease), provided any conditions set out in the break clause are met. For tenants, this can be a lifeline if business needs change – perhaps you need more space, less space, or want to relocate. For landlords, it can provide an opportunity to take the property back for redevelopment or other plans.

How Do Break Clauses Work in a Commercial Lease?

The lease will set out when the break can be exercised, how much notice must be given, the method for serving that notice, and any conditions attached to the break right. These details matter. If you fail to follow the requirements exactly, the break will not take effect and the lease will continue.

Break rights usually fall into two categories:

  1. Fixed date(s) during the term
  2. A rolling right to break at any time, or after a certain date, for example, on giving 3 months’ notice

Clarity is essential as any uncertainty over dates, notice periods or conditions can lead to costly disputes.

Conditions to Watch Out For

Most break clauses come with conditions. For tenants, these often include being up to date with annual rent payments up to the break date and handing back the property with vacant possession.

Some tenant break clauses also require the tenant to have complied with all its covenants under the lease in order to be able to effect the break right (which in practice is all but impossible to comply with at any point in time), although best practice now suggests limiting conditions to the essentials.

For landlords, a break clause might require evidence of redevelopment plans, such as planning permission.

Courts interpret these conditions strictly. If you miss a payment or fail to vacate fully, the break will fail. It’s that simple.

What are the benefits of a Break Clause in Commercial Leases

Including a break clause can benefit both parties:

  • For tenants: It’s a safety net if your business changes or you want to avoid being tied in for the full term. It also gives you leverage to renegotiate terms if market rents have shifted since the lease began – for example you might be able to negotiate a new rent-free period in exchange for not exercising the break right.
  • For landlords: It provides control over the property and the ability to adapt to market conditions, such as redevelopment or re-letting opportunities.

Given the volatility of today’s economic markets, break clauses are becoming ever-more important. Rising costs and economic uncertainty mean tenants need flexibility, and landlords often want the future option to repurpose or redevelop properties.

When negotiating and exercising a break clause, consider the following best practices:

  • Keep conditions simple. The RICS Code for Leasing Business Premises (2020) recommends that tenant breaks should only require payment of basic annual rent and handing back the property free from any occupation rather than full compliance with every lease obligation and handing back with ‘vacant possession’.
  • Follow notice requirements to the letter.  Many leases still require service by post, and the notice must be served by the deadline stated in the lease. Missing it, even by a day, or sending it to an incorrect address, can invalidate the break.
Final Thoughts

Break clauses need to be drafted with care and exercised with precision.

If you are considering including one in a lease (whether as a landlord or a tenant) we recommend that you seek advice early to avoid costly mistakes. 

Similarly, if you have the benefit of a break right in a lease coming up, we advise contacting us as early as possible (regardless of whether or not you are intending to exercise the break) so that we either have adequate time in which to prepare and serve the break notice on your behalf (if you do want to exit) or to allow enough time for negotiation and legal documenting of any benefit that you may want to receive in exchange for not exercising the break.

If you need assistance when it comes to break clauses, please contact us to speak to a member of our Real Estate team.

Rachel Duncan
Partner, Real Estate
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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