Questions on break clauses

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    Questions on break clauses

    Hi, I am hoping to use my first AST that contains a break clause, but I am still unclear about certain aspects of such clause; in particular:

    1. If say a 2 months notice is required to activate a break clause, does the break clause has to specify that on the break date: (a) the notice to terminate the Tenancy can be given from then onwards at any time, or, (b) that a notice to terminate the Tenancy becomes efective from then onwards? Obiously in one case the notice will become effective in 6 months but in the other in 8 months.

    2. If break clause is not activated, can one make T give notice at the end of the Term?

    3. In an AST with a break clause, can T be made to give 2 months notice (instead of 1 month only) if he wants to activate the break clause regardless of whether T does so before, on or after the break clause date?

    4. Does T only need to serve LL with a letter as a valid notice?

    5. Does LL need to serve a letter indicating he wants to activate the break clause as well as the S21 notice?

    6. Does LL need to serve a S21(1)(b) only if activating break clause before the break date? or can the same S21 be used on or after break date. To my mind this is correct because the Term is a fixed period that could last up to 3 years,

    7. Does LL need to serve a S21(4)(a) if he wishes to activate break clause on or after the break date?

    8. In a one year Term AST, can the break clause say that Tenancy can be brought to an end by activating break clause on the break date at 6 months only? So that both parties are tied for another 6 months till end of Term if notice was not given ro become effective at break date?

    9. If T refuses to vacate once S21 expires after activation of break clause, can the LL start charging X2 the ordinary daily rent till T vacates either voluntarily or by eviction order. Charging twice the rent would be under section 18 of the Landlord and Tenant Act 1737.

    If anyone knows the answer to any or all of my questions, I should be most grateful if he/she could please refer to the specific numbered question he is answering. Many thanks.

    #2
    Break Clauses? One word: Don't.

    Comment


      #3
      1. If say a 2 months notice is required to activate a break clause, does the break clause has to specify that on the break date: (a) the notice to terminate the Tenancy can be given from then onwards at any time, or, (b) that a notice to terminate the Tenancy becomes efective from then onwards? Obiously in one case the notice will become effective in 6 months but in the other in 8 months.

      Break clauses can take any form the parties agree. Any one or more of the following are variable: (a) when the notice can be served (b) the minimum (or for that matter exact) length of notice required (c) when the notice can or must expire

      2. If break clause is not activated, can one make T give notice at the end of the Term?

      No.

      3. In an AST with a break clause, can T be made to give 2 months notice (instead of 1 month only) if he wants to activate the break clause regardless of whether T does so before, on or after the break clause date?

      Yes. The parties are free to agree any period they like. It is a matter of contract not regulated by statute.

      4. Does T only need to serve LL with a letter as a valid notice?

      If you mean is a letter a valid way of giving a notice rather than something more formal, then yes, unless the clause requires the notice to be in a particular form. Absent any special requirement and naturally subject to the notice complying with the clause all that is necessary is for the notice to make it clear that the tenant wants to bring the tenancy to an end.

      5. Does LL need to serve a letter indicating he wants to activate the break clause as well as the S21 notice?

      It has been decided that a section 21 notice may operate to exercise a right to break. However, since it involves no significant extra work or expense, a landlord is best advised to serve a notice exercising the right to break and a day or two later follow it up with a section 21 notice.

      6. Does LL need to serve a S21(1)(b) only if activating break clause before the break date? or can the same S21 be used on or after break date. To my mind this is correct because the Term is a fixed period that could last up to 3 years,

      Not sure I understand the problem here. If you have an agreement with a landlord's right to break it is best to avoid at the beginning of the term serving a section 21 notice expiring at the end of the term agreed; if you decide later that you want to exercise the break you do not want the tenant arguing that you cannot serve a second section 21 notice expiring before the first one. A strict reading of section 21 suggests the argument would fail, but you do not want to get into the argument.

      7. Does LL need to serve a S21(4)(a) if he wishes to activate break clause on or after the break date?

      No, but he still needs to serve a section 21(1) notice.

      8. In a one year Term AST, can the break clause say that Tenancy can be brought to an end by activating break clause on the break date at 6 months only? So that both parties are tied for another 6 months till end of Term if notice was not given ro become effective at break date?

      Yes. See above. You can provide that the right to break must be exercised before a specified date or to take effect of a specific date or during a specific period.

      9. If T refuses to vacate once S21 expires after activation of break clause, can the LL start charging X2 the ordinary daily rent till T vacates either voluntarily or by eviction order. Charging twice the rent would be under section 18 of the Landlord and Tenant Act 1737.

      Possibly, but only if it is the tenant exercising the right to break. I say "possibly" because the exercise of a right to break is not the same as giving notice to quit.

      Comment


        #4
        JKO, I know, I know they don't have a good name. But, I have been informed by a solicitor they are the best way to tie down a guarantor of the Tenancy, so it is only for that reason I am going to use it.

        If you have an ordinary fixed term AST the moment it becomes periodic after 6 months the guarantor could argue in court that a new tenancy was created and the guarantee might not be enforceable. Also, with a no time limit SPT the guarantor might argue that he was beeing trated unfairly. But with fixed one year term AST with a break clause at 6 months no new tenancy is beeing created and there is a time limit for the guarantor.

        Comment


          #5
          Lawcruncher,

          Thanks for clarifying matters for me. That was very helpful. It is always a pleasure to read you, as you always address and answer questions to the point and with clarity. Thanks.

          PS: (i) Under question 6. what I meant was: Can one use S21(1)b throughout the Term of the Tenancy? (by that I mean before, on and after the break date, and should one not have to bother with S21(4)(a) at all?

          and, (ii) In question 9. as I understand your answer, only if T exercises activation of the break clause himself but then fails to vacate on due date, is when LL can "possibly" start asking for twice the rent. Is that so?

          Comment


            #6
            Originally posted by londiner View Post
            If you have an ordinary fixed term AST the moment it becomes periodic after 6 months the guarantor could argue in court that a new tenancy was created and the guarantee might not be enforceable. Also, with a no time limit SPT the guarantor might argue that he was beeing trated unfairly. But with fixed one year term AST with a break clause at 6 months no new tenancy is beeing created and there is a time limit for the guarantor.
            This does not make any sense.
            A break claise has no effect on the natural end of of fixed term tenancy, and thus on the creation of a statutory periodic AST.

            Either you did not understand whatthe solicitor said, or you should delete him from your address book.

            Comment


              #7
              I think it is more the case that I did not make myself sufficiently clear.

              An AST tenancy for a Term of a year with a break clause at 6 months continues to be the same tenancy throughout even though it contains a break clause. A SPT does not come into it.

              On the other hand a fixed term AST with no break clause that goes past the fixed term, will automatically become periodic from there on. A guarantor could argue that he guaranteed only one tenancy, that would correspond to the fixed term, and that the periodic tenancy that was created by statute is a new tenancy that he refuses to guarantee.

              All this means is that a one year fixed term AST with a break clause will tie down a guarantor much more easily for a limited period of a year and at the same time LL has the option to dispense of a bad tenant before term.

              Comment


                #8
                Originally posted by londiner View Post
                An AST tenancy for a Term of a year with a break clause at 6 months continues to be the same tenancy throughout even though it contains a break clause. A SPT does not come into it.
                I think you have misunderstood the law. An SPT always follows the fixed term of an AST, if it hasn't been ended, whether it contains a break clause or not.

                Comment


                  #9
                  Mrs Mug, thanks for your comments. I am not going to contradict you, as I am only trying to be clear in my own mind what the law says.

                  You say an SPT always follows the fixed term whether it contains a break clause or not. I would go along with that.

                  Now please consider the following escenario: LL wants G to guarantee a STA for a maximum period of one year. Not any longer than a year because G could later argue in court than any longer than that would be imposing an unfair long obligation on him.

                  So, LL has three options to tie down G for a whole year:

                  Option 1: Give T a fixed term AST for a year with no break clause. But if T becomes a bad T then LL can not make T vacare using a S21 for a whole year. Nevertheless it would be true to say that G is truly and well tied down.

                  Option 2: Give T an AST contract with a fixed term of a year but with a break clause at 6 months. If the break clause is not activated then G should be guaranteeing the same Tenancy for the whole year. However the advantage of option 2 over Option1 is that Option 2 can dispense of a bad T after 6 months.

                  Option 3: Give T a fixed term Tenancy for 6 months only and without a break clause. So LL can terminate Tenancy if necessary after fixed term. The problem is that once SPT begins G could argue that that is a new tenancy and so LL might not be able to have a sure guarantee to last a whole year as he wants it.

                  To my mind Option 3 is the best of the three to secure a G for a year. After that a new contracts for both T and G will have to be drawn, which is a small price to pay for having a reliable G available 100%.

                  Comment


                    #10
                    Originally posted by londiner View Post
                    An AST tenancy for a Term of a year with a break clause at 6 months continues to be the same tenancy throughout even though it contains a break clause. A SPT does not come into it.

                    On the other hand a fixed term AST with no break clause that goes past the fixed term, will automatically become periodic from there on..
                    Yes, I had understood ;-)
                    But this is completely and utterly incorrect. Hence my previous post.

                    Comment


                      #11
                      Surely agent can't be wanting a break clause simply so they can always charge for the full 12 months
                      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                      Comment


                        #12
                        Be aware that in order for a break clause to be considered a fair term you must grant equal rights to the tenant.

                        So whilst your plan seems sound to me you leave yourself open to a T leaving after 6 months via the break clause and maybe an agent trying to charge you for the full 12.

                        Comment


                          #13
                          Ryan28, and Theartfuldodger, my LA charges £600 incl VAT to find me a T regardless of how long T stays. 6 or 12 months makes no difference.

                          I just wanted to explain why I am going to use a one year contract with a break clause. If it were not because i want to tie down G for a whole year while still retaining the option of disposing of a bad T, I do not think that I would do it. A straight forward AST without a break clause would be simpler if did not need to use a G.

                          Comment


                            #14
                            Wouldn't it be simpler just to find another tenant?

                            Comment


                              #15
                              JJL, I read over and over again your post, trying to understand what you said as I respect your opinions. Am I correct in assuming that what you are saying is that is in a fixed term TA with a break clause that once the break clause is activated what then follow is an SPT? I am not sure what you mean. Sorry.

                              Comment

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