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What you need to know about break clauses in tenancy agreement

What you need to know about break clauses in tenancy agreement

 

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 find out.


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