Break Clause Explanation Please

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    Break Clause Explanation Please

    My ARLA agent (currently marketing my property) has advised me that a 'break clause' is only inserted if requested by the tenants and that it is not inserted as 'standard'. Is this correct? I thought that a break clause allows either landlord or tenant to give 2 months notice after a particular date or period of tenancy. I also understand that a break clause is sometimes inserted in a 'fixed term tenancy' and typically if a fixed term is for a year or more. What exactly is a 'fixed term'? The AST supplied by the agent, states the commencement date, 'To' and finishing date, 'From'. Does this make it a fixed term? Please help.

    #2
    A break clause must be mutual. It cannot be for one party without falling afoul of unfair terms.

    A break clause is used to break a contract during the fixed term.

    A fixed term is one that runs for a specific amount of time or has an end date. A periodic is indefinite.

    Often a break clause does not form part of a standard agents tenancy agreement and PaulF believes that such a clause must always be individually negotiated with proof of such being available.

    The particular date you refer to is usually four months. This means that two months notice can be given by either party after four months, thus ensuring that the six months assured term is satisfied.

    A break clause can be useful on a years tenancy as it gives the Landlord some security if the tenants turn out to be trouble. However, it also gives the tenant the right to leave early.
    For the avoidance of doubt, I am not a solicitor nor a specialist. I have simply spent many years in the business and am expressing my opinions. I would urge caution to any individual using these forums as a sole basis for decision without first speaking to a solicitor.

    Comment


      #3
      As I understood it mjpl(although you definitely have more experience in this than myself!) I thought that a break clause could be for tenant ONLY, as it if it was also for the landlord then it would be breaching the tenants statutory rights?
      Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

      Comment


        #4
        Mr Shed............brilliant! Absolutely spot-on!
        1. A break clause cannot be part of the standard terms if it applies only to be in favour the landlord (please mjpl do not refer to a "standard agents tenancy agreement" - there's no such thing, and if they are using a 'one-size-fits-all' agreement they are lazy and it will come back to haunt them!) otherwise it must be negotiated. There's really not much point in doing this as the statutory notice periods are usually more than enough to end the tenancy when it becomes periodic.
        2. A landlord cannot offer a fixed term with one hand then negotiate an option to end it prematurely with the other; however the tenant can be offered the opportunity to give notice to determine before the end of the fixed term if the landlord allows it by serving a specified period of Notice.
        3. Please remember there is no obligation on the tenant to give Notice to end the fixed term; they only have to give Notice when it becomes periodic! (People keep forgetting this!)

        About the most misleading piece of advice on this thread was the following bit by mjpl (I know he's only trying to be helpful):
        The particular date you refer to is usually four months. This means that two months notice can be given by either party after four months, thus ensuring that the six months assured term is satisfied.
        Last edited by PaulF; 06-11-2005, 20:19 PM.
        The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

        Comment


          #5
          Paul just with regards point 1...just out of interest, would a seperately negotiated term stand up in a repossession case anyway? As I understood it(I could perhaps be completely wrong), this seperate negotiation would become a standard common-or-garden contract, and breach of contract in this way, I thought, could only be dealt with purely on monetary loss in small claims. I am probably totally wrong though!
          Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

          Comment


            #6
            Don't quite understand your meaning!
            The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

            Comment


              #7
              Apologies I waffle on sometimes! I shall clarify.

              - If you negotiate a seperate clause, as you have said is the only way to do it in your response, then this is a "standard" contract, am I correct? Not a "tenancy" contract or anything.

              - It was my opinion, whether it is correct or not I do not know, that if a standard contract is breached then the courts cannot enforce the completion of the contract, they can only award the financial loss incurred by the plaintiff. So in this case, if the tenant is given 2 months to leave in the fixed term, and they do not leave, then this "eviction" cannot then be enforced by a court, as it is not a tenancy agreement, just a standard contract.

              I could be talking absolute rubbish though. Tell me if you need further clarification
              Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

              Comment


                #8
                Individually negotiated terms are referred to as "Special Tenancy Conditions" which removes them from the jurisdiction of the Housing Act 1988, but they cannot prejudice or circumvent the individual's statutory rights. They have to be clearly shown on an AST as such.

                I think you mean "term" not "contract". There is a habit of "standard terms" being referred to all the time to cover everything - they don't, there are "core, standard and individually negpotiated terms", all having a different status. There are "core terms" which means those not governed by statute but refering to rent, demise and length of tenancy, and standard terms extending to the obligations and liabilities both written and implied of the landlord & tenant to each other that are covered by the Housing Acts and Landlord & Tenant Act amongst others. There's nothing to stop anyone leaving out certain clauses if they wish to; however they should bear in mind that if it isn't clear then it's open to interpretation, and that nearly always favours the tenant. Don't forget, there's no absolute requirement to draw up an AST in writing, it can be created orally.
                Last edited by PaulF; 06-11-2005, 20:24 PM.
                The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                Comment


                  #9
                  Ah ok thanks paul
                  Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

                  Comment


                    #10
                    Paul,

                    If your contention is correct, why do ARLA whom you refer to continually have the following in their literature:

                    What Is A “Break-Clause”?
                    This is a clause sometimes inserted in a fixed term tenancy, typically if the initial fixed term is for a year or more. A break clause will usually be worded in such a way as to allow either landlord or tenant to give two months written notice at any stage after a particular date or period of the tenancy, thus terminating the tenancy earlier than the end of the original fixed term.

                    And the legal courses written by Marveen Smith and Francis Burkinshaw both cover in some detail the use of a break clause. It is of great concern to me that ARLA's tuition and examining board have such a difference of opinion.

                    In addition to the above we have activated break clauses on countless occassions over the years with no difficulty at all.

                    Depending on individual circumstances, both landlords and tenants are sometimes reluctant to commit to a fixed term tenancy unless it includes a provision that allows for the tenancy to be terminated before the expiry of the original fixed term. This type of provision is an option to determine. For an assured and assured shorthold tenancies, the landlord may not use the break clause to overide the statutory provisions, and so the Landlord will be required to provide at least two months notice to determine otherwise the break clause could be declared void.

                    As the common law requirement on the tenant's part requires only a reasonable amount of notice, is is common that both parties agree in the contract to two months written notice to terminate the fixed term. This has the advantage of a more equitable notice arrangement.

                    Furthermore I have checked your link with regards to the new Unfair Terms legislation and they are perfectly satisifed with a break clause provided it is mutual and allows for a suitable amount of notice as well as ensuring that the notice is the same for both parties.

                    I have seen many, many agreements that allow for two months notice to be given after four months. In fact this was a clause drafted by Judienne Wood for an international company I worked for. Please explain where this is misleading?

                    The one point I acknowledge is that there is no such thing as a standard agents agreement. I meant agent's standard agreement and was referring to the use of the word standard by the original poster.

                    Finally, you have made mention to the Landlord not being able to offer a fixed term with one hand and take it away with another. Why ever not?? The tenant's statutory rights will have been met after the initial six months and the tenancy agreement has a mutually agreed break clause signed by both parties offering equal terms.
                    For the avoidance of doubt, I am not a solicitor nor a specialist. I have simply spent many years in the business and am expressing my opinions. I would urge caution to any individual using these forums as a sole basis for decision without first speaking to a solicitor.

                    Comment


                      #11
                      But mjpl if a break clause is allowed, then what on earth is the point in having any kind of fixed term?
                      Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

                      Comment


                        #12
                        Marveen Smith

                        "Break Clauses

                        If either party wishes to have the right to break the fixed term a clause should be included in the agreement covering the following:

                        When the right to break can be triggered.

                        This should be on a specific date or after a certain period of time;

                        The notice period to be given. Notice should always be in writing and preferably end at the end of a period if the tenancy;

                        State to whom notice should be given;

                        Method of service, usually first class post or by hand;

                        State that the tenancy is determined at the end of the period of notice without taking away the rights of the parties to sue for breach.

                        It is also important that the term of the tenancy as shown in the tenancy agreement refers to the break clause, otherwise there could be a conflict.

                        Example
                        The tenancy is for a term of one year but subject to clause (insert number) below.

                        If a landlord has a break clause in an AST the notice period must be 2 months and not 60 days. The break clause should also state that the notice period is triggered by serving a Notice under section 21 of the Housing Act 1988.

                        If the tenancy is not under the Housing Act 1988 then the landlord and the tenant only has to give one period’s notice, which means one month if the tenant pays monthly or one quarter if the tenant pays quarterly; although a longer period may be negotiated between the parties. However if the tenant is an individual the landlord cannot impose a break clause giving two months’ notice on the tenant as that would be an unfair term, unless the clause is individually negotiated between the parties. (See our article on Unfair Terms in Consumer Contract Regulations 1999)."

                        Comment


                          #13
                          Thank you energise, I nearly missed my train typing out that last one so did not check spelling or research it any further.

                          MrShed, simply because that it what they agreed to! No one forced either party to include the clause nor to sign the agreement. The whole point of a contract is to set out the terms under which an agreement has been reached. The OFT are only interested in making sure that clauses are fair. In this instance both parties have the same rights, why would it not be fair?

                          I would be interested to know what side of the fence lawstudent would sit on this one.
                          For the avoidance of doubt, I am not a solicitor nor a specialist. I have simply spent many years in the business and am expressing my opinions. I would urge caution to any individual using these forums as a sole basis for decision without first speaking to a solicitor.

                          Comment


                            #14
                            One or two questions and answers?
                            Originally posted by mjpl
                            Paul,
                            It is of great concern to me that ARLA's tuition and examining board have such a difference of opinion.The Examination Board for ARLA/NAEA Technical Award does not give opinions on interpretations, they merely set the syllabus and exams, and mark the papers.
                            Finally, you have made mention to the Landlord not being able to offer a fixed term with one hand and take it away with another. Why ever not?? Because you won't be able to impose it on the tenant if he doesn't want to be bound by it - see Energise's missive from Marveen Smith which explains it well. Better still phone her!The tenant's statutory rights will have been met after the initial six months and the tenancy agreement has a mutually agreed break clause signed by both parties offering equal terms. Are you talking about a break clause after the initial fixed term of 6 months or after 6 months for a fixed term of a longer duration? I think you mean the latter
                            The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                            Comment


                              #15
                              Thanks Paul,

                              In answer to your points:

                              1. I think you know what I mean. If an ARLA course instructs me on the use of break clauses but the examiner (you) feel that it is invalid, who is right and how will the paper be marked.

                              2. I see nothing in Marveen Smith's statement that disagrees with what I have said. In fact it appears to confirm my thoughts exactly. I can only imagine that you are referring to the need for such a clause to be individually negotiated, but I have never disagreed with that.

                              3. I do mean the latter.
                              For the avoidance of doubt, I am not a solicitor nor a specialist. I have simply spent many years in the business and am expressing my opinions. I would urge caution to any individual using these forums as a sole basis for decision without first speaking to a solicitor.

                              Comment

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