Charity Retail Association Property Group Kathryn Williams Stone - PowerPoint PPT Presentation

Charity Retail Association Property Group Kathryn Williams Stone King LLP

Introduction • Break clauses • Property update

Good vs. Bad break clause GOOD BAD The Tenant may terminate this lease by The Tenant may terminate this lease by serving a Break Notice at any time on or serving a Break Notice at any time on or after the Break Date on the Landlord. after the Break Date on the Landlord. A Break Notice served by the Tenant A Break Notice served by the Tenant shall be of no effect if, at the Break Date: shall be of no effect if, at the Break Date: (a) the Tenant has not paid any part of (a) any payments due under the lease the Annual Rent, or any VAT in respect have not been paid up to date; of it, which was due to have been paid; (b) vacant possession of the whole of the or Property is not given; (b) the Tenant remains in occupation of (c) there is a subsisting breach of any of any part of the Property; or the covenants or conditions on the part (c) there are any continuing subleases of of the Tenant in this lease. the Property.

Key factors • Who can exercise the break? • Types of break clauses – Fixed dates – Rolling break – Break after a specific date

Fundamental points • Releases the tenant from future liability but not subsisting breaches • Time is of the essence • Strict compliance with conditions

Conditions on break • Best position – unconditional break • Lease Code compliant clause – up to date with main rent – give up occupation – leave behind no continuing subleases • Break subject to other conditions

Example conditions (1) All payments due under the lease must be paid up to the break date

Example conditions (1) All payments due under the lease must be paid up to the break date – Applies to service charge/insurance rent – Check late payments – any interest due? – Ask Landlord for costs breakdow

Example conditions (2) All rent due under the lease must have been paid up to date

Example conditions (2) All rent due under the lease must have been paid up to date – Break clause falls in the middle of rent quarter – Repayment of rent – specific clause

Example conditions (3) Tenant must have performed and observed all of its covenants and obligations in the lease

Example conditions (3) Tenant must have performed and observed all of its covenants and obligations in the lease – Absolute – Any subsisting or trivial breaches then break will be invalid

Example conditions (4) Tenant must not be in material breach of its repairing covenants

Example conditions (4) Tenant must not be in material breach of its repairing covenants – Qualified condition – Material = Landlord’s ability to re-let or sell the property – Consider carrying out an audit

Example conditions (5) Tenant must give vacant possession

Example conditions (5) Tenant must give vacant possession – No subleases – Don’t leave any items behind

Exercising break clause • Notice requirements – How much notice is required? – Is the form of notice correct? • Serving notice – Is it served on the correct party? – Method of service – Date of delivery of notice

Impact of break clause • Release from future liability on the break date • Withdrawal – only by mutual agreement • Caution about using break clause as a tool for renegotiation

Relationship with other clauses • Rent review – Break date to follow a rent review • Subleases – Same break dates as headlease (especially if vacant possession is a condition)

Top Tips! • Check the lease and any supplementary documents • Keep evidence of posting the break notice • Consider carrying out a compliance audit before serving the break notice • Pay all sums due even if there is a dispute • Check for late payments • Negotiate with the landlord - can the notice be accepted on payment of an agreed sum?

Missed/invalid break • Assignment – Guarantee – Landlord consent • Subletting – Landlord consent • Surrender – Mutual agreement

Property update • Chancel Repair Liability • Business rates • CDM Regulations 2015 • Right to Rent

Property update • Chancel repair liability – Disposal of property since 13 October 2013 for value not bound unless noted on title – CRL can still be registered against unsold properties and where wrongly noted against properties sold before October 2013 – Obtain chancel repair search

Property update • Business rates review – Consultation closed in June 2015 – Next announcement - budget next year • CDM regulations 2015 – Role of CDM Co-ordinator is replaced by “principal designer” • Right to rent – Immigration checks

Any questions? Kathryn Williams Tom Murdoch Associate Solicitor Partner Property Team Charity and Social Enterprise 01225 324413 0207 3241750 kew@stoneking.co.uk tm@stoneking.co.uk