Breaking up Is Hard to Do – Advice to Commercial Tenants

Gloomy statistics about business failures nationwide have prompted top law firm Furley Page to issue advice to commercial tenants – read the small print of lease agreements, abide by the rules, or face big problems.

Furley Page Partner Andrew Gough warns: “In these days of economic uncertainty, tenants are increasingly negotiating leases with break clauses, to enable an early exit from commercial premises if their business does not succeed. However, exercising a break clause can be fraught with difficulty, so early advice and planning is required to be successful.

“Failure will mean that the break is ineffective. You may have difficulty in assigning or subletting in the current market and will therefore be stuck with the lease until the next break date or even termination.”

Figures issued by the Office of National Statistics showed failed businesses in the UK rose by 20,000 (7.4%) to 297,000 between 2009 and 2010, the second consecutive year failures had outnumbered start-ups.

In Andrew’s experience, most break clauses imposed on commercial tenancies include pre-conditions which must be fulfilled before the set date. And, he warns, they are always biased in favour of landlords.

Andrew has drawn up a number of ground rules for commercial tenants, including:
• ensure you comply with time limits for giving notice
• if there is a fixed form of break notice, use it – do not draft your own
• ensure all payments, including premiums, are made to the landlord before the break date
• clear all fittings and rubbish from premises and hand back all keys when required.

Andrew adds: “This sounds like common sense, but the case books are strewn with recent cases where tenants have failed to take even basic steps to protect their position. It might be costly to employ professional assistance, but remember the landlord wants your rent and for you to be liable for rates and other outgoings which would otherwise fall on him if the property is vacant. If he is able to thwart your right to terminate, then you are on the hook for a further period. You are stuck in an unhappy marriage.”

For further advice contact Andrew Gough at ajg@furleypage.co.uk, call 01227 763939 or visit www.furleypage.co.uk

Furley Page Solicitors
Established in 1725, Furley Page Solicitors has offices in Canterbury, Chatham, Whitstable and London, offering legal services across wide-ranging practice areas in commercial and private client law. It is led by more than 20 partners and supported by more than 100 legal staff. Furley Page is recommended by Chambers and The Legal 500. Furley Page is authorised and regulated by the Solicitors Regulation Authority and authorised by the Financial Services Authority to offer independent financial advice. For further details visit www.furleypage.co.uk