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Court finds in favour of tenant friendly break provision in lease

In the case of Goldman Sachs International v Procession House Trustee Ltd & another (2018) the High Court has recently ruled that a tenant of office premises could bring its lease to an end five years before the contractual expiry date (thus saving itself over £20 million in rent) by exercising the break clause in its lease, so long as it yielded up the premises with vacant possession and there were no rent arrears. It was not a further condition of the break clause that the tenant reinstate the premises pursuant to a separate but linked yielding up clause in the lease.

The tenant wished to exercise the break clause in accordance with the requirements of giving vacant possession and no rent arrears. The landlord argued that it was also a pre- condition to the exercise of the break that the tenant  must return the premises pursuant to the separate ‘yielding-up’ clause which also meant reinstating the premises to their original layout.

The Court held that whilst the break was clearly conditional on the tenant not being in arrears at the break date and the premises being yielded up with vacant possession, the break was not conditional upon the tenant having complied with all the requirements of the yielding up clause. The landlord has sought permission to appeal the ruling to the Court of Appeal so this may not be the final word on the matter but this case serves as a useful reminder that leases need to specify unambiguously any pre-conditions which are to attach to the exercise of break clauses.

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