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Legal A – Z: ‘B’ is for break clause

Q) How does the timing of a break clause coincide with a rent review?

A: The general presumption is that time is not of the essence for working through the machinery of a rent review clause. However, as strong a presumption as that may be, it may be rebutted if there are clear indications to the contrary in the lease.  One place to look for such counter-indications is the break clause.

A break clause may indicate that time is to be of the essence for rent review if:

The tenant may break the lease on a specific date, to which the review process is inter-related – the implication being that the parties intended the tenant to know what the reviewed rent would be before deciding whether or not to break the lease. 

The wording and and/or machinery of the two clauses are identical – the implication being that the parties intended, by using the same words, to indicate that time was to be of the essence for both.

On the other hand, the existence of a break clause may not make time of the essence if the review process is automatic or does not include a timetable, or if the tenant has the right to initiate the review himself.

(Previously published in hard copy by Commercial Property Journal)