If T has a break clause in the lease, than in the current market there is a considerable likelihood that it will be exercised. Needless to say, Ls adopt a strict approach when served with break notices under such clauses. 


No doubt L will check that the notice has been served correctly; remember, it was said in Mannai [1997] that any precondition must be complied with (eg if the lease says the notice must be served on pink paper then indeed it must be served on pink, not blue, paper!). Secondly, L will no doubt check the timing of the notice to ensure that this has also been strictly complied with. Thirdly, L will want to be certain that all the existing lease provisions have been complied with – no doubt L will respond with a comprehensive dilapidation schedule and argue that T is in breach of repair and decoration obligations, and L will also insist that rent is paid fully up-to-date. 


One of the issues to be resolved when negotiating the terms of a turnover lease is what happens on assignment. 


The problem for L is that the turnover rent percentage will be set at the grant of the lease by reference to the initial T’s business. Any assignee may trade differently (and may even have a completely different business). This is something that needs to be considered at the Heads of Terms stage. Suggestions include: 


A rent guarantee clause involves the seller guaranteeing some of the rent to the buyer. In essence, the seller agrees to make payments to the buyer of the property, equal to the rents which would otherwise be generated from the empty property if it was let. From the seller’s point of view, he will receive a higher capital price on the sale, but will be required to make payments during the guarantee period.

Such clauses can be very difficult to negotiate, and they also raise the problem of ongoing monitoring of the situation. In practice, such arrangements tend to be agreed when there are vacant premises which the seller believes the buyer will be able to let soon after buying, or which were let when the buyer made its offer to buy, but have since become vacant (or perhaps T has entered into some form of insolvency). In such a situation a temporary guarantee from the seller to pay the ‘vacant’ rent may seem attractive. But there are many complications to consider:

At the end of a tenancy, L will be entitled to compensation from T for any breach of repair (and for failing to put the premises into their original condition).

The starting point is to say that T is liable for the ‘reasonable cost’ of doing the repair works, plus loss of rent for the period, until the works have been completed. However, this is all subject to s18(1) LTA 1927 which says that damages for breach of repair payable on termination of the lease shall be limited to the reduction in value of L’s reversion. But, how do you calculate that amount?