Can I include a break clause in an AST Tenancy Agreement?

Understanding Break Clauses in AST Agreements

Definition and Purpose

A break clause gives either the landlord, tenant, or both the right to terminate the fixed term tenancy early. It offers flexibility and can be a safety net in changing circumstances.

Inclusion in Tenancy Agreements

Break clauses are commonly found in fixed-term AST agreements, offering an early termination option under specified conditions.

How to Exercise a Break Clause

Serving Notice

To activate a break clause, a written notice must be served, adhering to the specific wording of the clause. It's essential for the notice to be clear and unambiguous.

Notice Period Requirements

The clause should state the length of notice required, which is often one or two months.

Joint Tenancies and Sub-Tenancies

In cases of joint tenancies, all tenants must agree to serve a notice. The activation of a break clause in a principal tenancy will also end any sub-tenancy, with limited exceptions.

Legal Considerations

Fairness and Compliance

The break clause must comply with consumer protection laws and be fair. An unfair term, such as a break clause that only benefits the landlord, is likely to be unenforceable.

Conditions for Activation

Any conditions attached to the break clause, such as compliance with tenancy obligations, must be met for it to be effective. Overly strict conditions may render a clause unfair.

Rent Adjustments

If the tenancy ends mid-term via a break clause, rent paid in advance is still due and is not subject to apportionment.

ASTs Created Before 28 February 1997

These have specific considerations regarding break clauses, affecting whether the tenancy is classified as an AST.

Practical Implications

Activation by Landlords

If a landlord activates a break clause, it may end the fixed-term tenancy but could lead to the creation of a statutory periodic tenancy. Subsequent possession proceedings might require a separate Section 21 notice.

Activation by Tenants

Tenants activating a break clause do not need to serve additional notices; the tenancy ends upon the expiry of the break clause notice period.

Vacant Possession

A requirement to give vacant possession is often a condition for activating a break clause. This means the property must be left free of people, belongings, and any sub-leases.

Difference from Forfeiture Clause

Unlike a break clause, a forfeiture clause allows the landlord to end the tenancy for breach of specific terms and is subject to statutory restrictions in residential tenancies.

Best Practices for Landlords

Clarity in Agreement

Ensure the break clause is clearly articulated in the tenancy agreement, outlining the process for serving notice and any conditions attached.

Legal Advice

Consider seeking legal advice to ensure the clause is fair, compliant, and enforceable.

Communication with Tenants

Maintain open communication with tenants regarding the implications and procedures related to the break clause.

Incorporating a break clause in an AST provides flexibility for both landlords and tenants. It's essential to ensure that these clauses are legally sound, fair, and clearly outlined in the tenancy agreement to avoid potential disputes and misunderstandings.