Penna plc, 20 St Mary-at-Hill
Cluttons’ lease advisory and dilapidations resolution consultancy teams provided strategic advice to Penna plc to assist in the negotiation of a particularly onerous break clause.
The successful operation of a break clause, particularly one that is dependant upon compliance with certain stipulations, can be a challenge for tenants. A landlord is under no obligation to assist a tenant operating a break clause and it may not be in the landlord’s best interest for the tenant to operate the clause successfully.
In this case, the break clause required strict compliance with all covenants contained within the lease. This included payment of rates, rent and service charge liabilities as well as compliance with the repairing, reinstatement and redecorating provisions. Failure to adhere to terms of the break clause would result in the tenant being liable for a further five years of rent, rates and service charge at an annual cost of £285,000.
Cluttons undertook a comprehensive assessment of all elements of potential liability under the terms of the lease. An assessment of the dilapidations liability and an appraisal of the costs for compliance were prepared. A strategy was formulated with the client to ensure the landlord was contacted early enough allowing plenty of time to complete all necessary works in case the discussions with the landlord proved unsuccessful.
This strategy led to successful negotiations with the landlord for an early surrender of the lease. This removed the requirement for Penna to carry out the dilapidation and reinstatement work as well as the consequential risk of the landlord being able to argue that the terms of the break were not met and then the lease would continue.
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