Using break clauses to end fixed term tenancies

Break clauses can be in any type of fixed-term tenancy agreement. They are mainly found in fixed-term assured shorthold tenancy agreements.

A break clause usually specifies the form and length of the notice required to end the tenancy. Unless the break clause provides differently, the right to break is exercised by serving a written notice.[1]

It is essential to comply with the specific wording of the clause or the notice might not be valid. However, mistakes in a notice do not necessarily invalidate it, provided that in all the circumstances its meaning is clear, the mistake is obvious, and the recipient can safely rely on it.[2]

The clause usually also says if it can be exercised by the landlord, by the tenant or by both. If the break clause is silent as to who can exercise the right to break, then it is only the tenant who can exercise it.[3] It is very likely to be an unfair term if a break clause can only be exercised by a landlord.

If the tenancy agreement explicitly states that service will be effective where it is done in accordance with section 196 of the Law of Property Act 1925, valid service of notice to exercise a break clause is to be made by: 

• registered post

• recorded delivery

• personal delivery to the landlord or landlord's agent's last known place of abode or business in the UK 

Alternatively, the agreement can provide expressly for service by these methods.

In one case,[4] where the tenancy agreement provided an address for the joint landlords, and incorporated section 196 of the Law of Property Act 1925, the court held that the tenant's notice to activate a contractual break clause was valid even though none of the current landlords had any remaining connection with the address provided. The address given in the agreement could be construed as the landlord's 'place of abode or business' in the absence of any specific information to the contrary. The landlords should have informed the tenant of any change of address if they wanted notices served elsewhere.

Valid service on any one joint landlord is sufficient to activate a break clause.

A break clause usually specifies the length of notice required to end the tenancy by both the tenant and the landlord.

There is no minimum period of notice that a break clause must require in order to be valid, because the clause is a matter of contract. So a break clause that required only one day's notice would be valid, provided that it can be exercised by either party (subject to the requirements of fairness).

Activation by landlord

In some cases the activation of a valid break clause by a landlord might not allow them to commence possession proceedings. For example, where the landlord of an assured shorthold tenancy serves notice in accordance with a break clause this only ends the fixed-term tenancy. The fixed-term tenancy is automatically replaced by a statutory periodic assured shorthold tenancy.[5]

Where a landlord wishes to regain possession of an assured shorthold tenancy without having a specific reason or ground, they must give notice and obtain a court order using the section 21 notice procedure, which requires a minimum of two months' notice. 

The Court of Appeal held that a:[6]

• separate notice was not required to activate the break clause before a section 21 notice could be served

• section 21 notice to end an assured shorthold tenancy served by a landlord can be effective in operating a break clause

Activation by tenants

A tenant who activates a break clause does not need to serve any additional notice. Their tenancy will end on expiry of the notice period (as required by the break clause). A notice served under a break clause does not need to meet the requirements of a notice to quit (a notice to quit is only necessary to end a periodic tenancy).

Where an assured shorthold tenant activates a break clause and then does not leave after the notice period expires, the landlord does not need to obtain a court order for possession. However, where a tenant is an occupier with basic protection or a flexible tenant (a form of secure tenancy granted for a fixed term) who activates a break clause, the landlord needs a court order if the tenant does not leave. This is because section 3 of the Protection from Eviction Act 1977 only requires a landlord to obtain a court order after a tenancy has come to an end and the tenant continues to reside where the tenancy is ‘neither a statutorily protected tenancy nor an excluded tenancy’.

The definition of a ‘statutorily protected tenancy’ includes an assured, assured shorthold and regulated tenancy but not a secure or flexible tenancy (or a tenant with only basic protection).[7]

A break clause must comply with consumer protection law and be fair.

A break clause is likely to be found unfair if, for example, a landlord inserted a break clause in the tenancy agreement allowing them to bring the agreement to an end on service of two months' notice without inserting a similar provision allowing the tenant to terminate the tenancy in the same way.[8]

Conditions attached to a right to break

Under contract law a break clause, including any conditions attached to the right to break, must be strictly adhered to if it is to be effective.

For example, the right to break may be conditional on the landlord and/or tenant having complied with the obligations of the tenancy[9] eg obligations to carry out repairs, decorate premises, pay rent, pay a sum to the landlord to allow the termination of an agreement before it expires, yielding up vacant possession.[10]

A requirement to give vacant possession upon exercising a break clause is met if the tenants leave the property free of furniture and belongings (chattels), people, and interests.[11] In this context, an interest is a right to remain on the premises, such as a sublease. Leaving premises in a poor state of repair, including missing fixtures, is not inconsistent with giving vacant possession.[12]

A break clause could be unfair if the conditions regarding compliance are too strict.

Where a tenancy ends following the exercise of a break clause, rent that is payable in advance is still due, and cannot be apportioned.[13]

If the tenancy agreement contained a break clause allowing the landlord to end it earlier than six months after the start of the tenancy, the tenancy will not be an assured shorthold tenancy (AST). Rather, it will be a fixed term assured tenancy, as long as the conditions for assured status are met. An assured shorthold tenancy will not be invalidated, however, if the agreement contains a break clause that can be exercised by the tenant only.

Where there are joint tenants, all tenants must agree to serve a notice under a break clause and surrender the tenancy, unless the agreement specifies otherwise.

When a principal tenancy is ended by the activation of a break clause this will also end any sub-tenancy, but there are limited exceptions (see Position when a mesne tenancy ends for more information). This principle cannot be contracted out of by the parties.[14]

A forfeiture clause can allow the landlord (and only the landlord) to end the tenancy agreement where there has been a breach of a term specifically mentioned in the clause itself.

Residential tenants are protected by legislation which restricts the right of landlords to end a tenancy by way of forfeiture.

For more information about forfeiture clauses and notices see Repossession of leasehold properties.