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Exercising a break clause: The best approach

My company has expanded rather faster than anticipated and we wish to move to larger premises. There is a break clause in our lease that we intend using. However our lease requires us to return the office back to its original state and this will mean the removal of a mezzanine floor we added. What should we do?

Exercising a break clause is a tricky procedure. In many cases it will be a one off right, which must be implemented correctly to be fully effective. The first step will be to get hold of a copy of your completed lease for review. You will need to carefully consider the terms of your lease and the break clause and any penalties for exercising the break. Only then can factor in all of the overall costs.

There are very strict rules about providing "vacant possession" of premises and considerable case law on how tenants need to deliver back premises to landlords. It may well be that the mezzanine might be considered part of the landlord's premises, particularly if it is fixed and incorporated into the premises. If that is the case it may not need to be removed prior to vacation.

It is very easy to fall foul of various requirements so take care in examining your lease. This is a complex area and I would recommend seeking specialist help from a solicitor and a building surveyor with expertise in leases and dilapidations before serving the notice.

This article first appeared in the Financial Times in April 2014.

Karen Mason is head of the Commercial Property department

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