What Is a Break Clause in a Tenancy Agreement and How Does it Work
Break clauses are useful for both tenants and landlords and allow them to end a tenancy agreement before the contract ends. But understanding a break clause and how to use it is a complicated subject. Below, we outline what a break clause is, the conditions in which it can be used, and how it is beneficial to both landlord and tenant. First, let’s dig into what a tenancy agreement is.
What is a tenancy agreement?
A tenancy agreement is a contract between a tenant and their landlord. It does not have to be written and can be verbal, although a verbal agreement is difficult to prove in a court of law.
A tenancy agreement gives certain rights to both the tenant and landlord. For example, a tenant will have the right to occupy the accommodation provided by the landlord and the landlord will have the right to receive rent for letting them do so.
The tenant and the landlord may make arrangements about the tenancy, and these can form part of the tenancy agreement as long as they do not conflict with any legal rights both parties have. It’s important to note that both tenants and landlords have rights and responsibilities that are set out in legislation and must be followed.
What is a break clause?
A break clause is a clause that can be inserted into tenancy agreements and allows either the tenant or landlord to end the contract early with no penalty if certain criteria are met.
From the tenant’s perspective, this allows them to leave the property earlier than the length set out within the tenancy agreement. From the landlord’s perspective, it allows them to remove a tenant mid-contract for any reason they see fit.
Typically, break clauses are inserted into the middle point of a tenancy agreement. For example, a 12-month contract may have a break clause at the six-month point.
Are all break clauses the same?
No. Break clauses can be worded differently depending on the needs of the two parties. Some will specify exactly how the agreement can end. While others may only require the notification to the other party. Most will have some form of enforced time frame, such as giving 2 months’ notice.
Details of how a break clause can be activated will always be clearly stated in the tenancy agreement.
Pros of having a break clause in a tenancy agreement
The main benefit of having a break clause in a tenancy agreement is that it allows flexibility for both tenants and landlords.
For a tenant, it allows them to enter a tenancy agreement knowing that should circumstances change, for example, losing a job or leaving a partner, they have the option to leave the tenancy and remove any monetary burden this may place on them.
For a landlord, the pros also provide the assurance that if their personal circumstances change, they have the flexibility to cancel the tenancy agreement. On top of this, it gives them the tools to remove problematic tenants or those that are causing issues for them, the property, or their rental business.
Cons of having a break clause in a tenancy agreement
Although the benefits of a break clause are clear to see, there are a few downsides, including:
The automatic nature of the break clause can work against both landlords and tenants. And while a timeframe is often enforced (such as 2 month’s notice) it can leave either party in the lurch with tenants forced to find new housing quickly and landlords faced with a sudden lack of income.
One thing that all landlords have to remember is that legally break clauses cannot be activated from their side for the first 6 months of a tenancy agreement unless they can prove that the tenant has broken the terms of the agreement. On top of this, a break clause on its own cannot enforce the removal of a tenant. If a break clause is triggered and the tenant refuses to leave, court action will still need to be sought and a possession order issued to evict the individuals.
When, why, and how may a landlord use a break clause?
As stated previously, the details for when a landlord can enforce a break clause may differ depending on the tenancy agreement. The wording of the agreement will dictate when a landlord can trigger the break clause.
Should a landlord wish to activate a break clause, they must provide the tenant with at least two months’ notice in the form of a Section 21, and this cannot be in the first 6 months of the agreement. A section 21 notice tells the tenant that they intend to take possession of the property for the reasons given and should detail the fact that the break clause is being activated.
If there are additional clauses in the tenancy agreement relating to the break clause, these must be adhered to. Failure to follow the correct procedures may see the tenant refuse to leave the property and they may even take legal action against the landlord.
If the tenant refuses to leave, the only course of action is to seek a possession order through the courts.
When, why, and how a tenant may use a break clause?
A tenant can trigger a break clause so long as they meet the criteria set out in the tenancy agreement. Most break clauses will dictate a time scale of enforcement. If a tenant intends to activate a break clause, they must provide the landlord with the correct notice and fulfil any related conditions. This notice must be in written form unless the tenancy agreement states that a different form is acceptable (such as email).
What happens after a break clause is activated?
Once a notification from either a tenant or a landlord is issued stating that they wish to trigger a break clause, it is likely that the first step the other party will take is to check whether the break is valid. Sometimes a party may require a solicitor to check through the terms and conditions of the lease. If the break clause notice itself is deemed invalid, a new one satisfying the correct criteria may need to be issued.
Once both parties are satisfied that the break clause can be activated, the notice period will begin. The landlord will start their process of working out how much rent the tenant owes and the tenant must prepare to vacate the property by the end of the notice period. The usual inspections of the property and returning of deposits etc. will take place, and the two parties will part ways once the notice period expires.
Useful resources for understanding break clauses