You may have heard about break clauses. There may even be one in your
tenancy agreement but you're not quite sure how it works. They are fairly
common as they allow both landlord and tenant some flexibility on terminating a
lease. But what exactly is a break clause and how does having one affect
landlords and tenants? We'll answer those questions and more here.
What is a break clause?
Having a break clause in the tenancy agreement
allows either the landlord or the tenant to terminate the lease before the end
of the contract. The break clause usually comes into effect halfway through the
fixed term of the tenancy. A 12-month lease will have a break clause which
activates after six months for example.
But a break clause can't be actioned within the six first months. In
affect this means short-term lets can't have such a clause in their tenancy
agreement.
How do break clauses work?
Either landlord or tenant can activate a break clause. But each must
give proper notice.
For landlords this means giving the tenant two months’ notice. The
landlord serves a Section 21 to enforce the break clause.
If the tenant wishes to activate the break clause they have to do so in
writing. The period of notice a tenant has to give will be in the tenancy
agreement. Four weeks is the norm.
What are the benefits of break clauses?
Both landlords and tenants benefit from the flexibility a break clause
provides.
Landlords
·
Can regain possession of the property even
during a long-term lease.
·
Provides an easy way to be able to remove
tenants who fall into arrears.
·
Easier to serve a Section 21 than pursue eviction
with a Section 8.
·
A break clause allows the landlord to sell the
property if personal circumstances change.
·
An idea opportunity to raise the rent.
Tenants
·
If income drops it allows an early exit before
getting into rent arrears.
·
Provides flexibility if working on short-term
contracts.
·
If a relationship breaks down it allows both
tenants to move out.
·
Flexibility to move should a more suitable
property become available.
And a break clause will be beneficial to both parties if the
landlord-tenant relationship breaks down for any reason.
Is a break clause essential?
Not all tenancy agreements will have a break clause. As we mentioned
earlier short-term leases of six months don't require a break clause. And, possible
government legislation notwithstanding, some landlords will continue to use
short-term contracts instead of a break clause.
Break clauses are most common in long-term leases. This gives each
party an opportunity to end the tenancy if circumstances change. But even if
there isn't a break clause it's still possible to end a long-term tenancy
early. As long as both landlord and tenant agree.
The renter can ask to surrender the tenancy. This sometimes benefits
both the landlord and the tenant - for example if the tenant loses their source
of income. Surrendering the tenancy will ease the financial strain on the renter
and the landlord won't lose rental income.
However, a break clause in the tenancy agreement will remove the need
for negotiation. Inserting such a clause may be in the best interests of
landlord and tenant.
The rules have changed. How much can a landlord ask a tenant
to pay as a security deposit? Use our free calculator to
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