July 5

To break or not to break, that is the buy-to-let landlord’s conundrum

Should you include a break clause in the tenancy agreement

When I discussed the 10 essential tenancy agreement terms and conditions recently, one of the optional conditions I mentioned was tenancy break clauses. Here I look at these and what they mean in practice.

What is a break clause?

A break clause is simply a written agreement (as part of the tenancy agreement) that allows either you, as the buy-to-let landlord or the tenant to end the lease early. That’s a pretty powerful tool in a range of situations, not least of which if you have a nightmare tenant.
Whatever the intended period of notice under the break clause, as a buy-to-let landlord you won’t be able to give notice until the break clause comes into effect. Whatever the break clause says, you should be aware that you have no guaranteed right to possession of the property during the first six months of the tenancy.

What is included in a break clause?

A break clause should detail how notice can be given and the specific way in which notice can be served.  However, this has to comply with mandatory requirements under the law – if it doesn’t then the break clause will be deemed invalid.
A tip for the buy-to-let landlord is to stay in touch with the tenant and be mindful of his or her intentions before the break clause comes into force. This is a good strategy to use as part of property management in all cases: knowing your tenant’s intentions will give you a better handle on the potential to raise rent and also if you need to consider marketing the property for a new tenant.

When can a break clause be put into action?

Keeping the above conditions in mind, it’s usual for a break clause to be actionable either on certain dates or after a specific period of the tenancy. For example, a clause might read something like “on the monthly anniversary of tenancy” or “at any time after the end of the statutory tenancy period”. You may decide to link the break date with a rental review date, though if this is the case care should be taken that the break clause is exercised properly.

Additional elements of a break clause

Remember that the break clause is two-way, and you won’t want to write a break clause that gives all the power to the tenant. For example, you may want to include that for the tenant to exercise a break the rent must be fully paid up-to-date.
The important thing to do is to ensure that a break clause is written concerning to current law and that it is written to do what you want it to do without being biassed in favour of the tenant.

The break clause isn’t simply to get the tenant out

You’ll want to include that the break clause means the vacant possession and that the tenant removes all of his or her belongings. The last thing you need is to be left with a big mess to clean up or property to be removed at your expense. This part of a break clause will help with retention of any deposit should the need arise.
You’ll also need to arrange for an end of tenancy inspection, comparison to your property inventory, the return of keys, and handling of the deposit held under the tenancy deposit scheme.
Another good tip is to schedule an inspection shortly before the break clause if you believe you’ll want to action the break. In this way, you’ll be able to assess the condition of the property ahead of time and if the tenant has complied with the conditions of tenancy (for example, minor repairs and maintenance).

In summary

A break clause is a useful addition to the tenancy agreement, but must conform to certain standards and be held to be within the law. Though it does not permit possession during the first six months of the tenancy, it does make things a little easier after this time.
Of course, there are a number of reasons you might want a tenant to vacate a property, and these might be covered by other methods of possession. Next time I’ll start looking at how buy-to-let landlords can end tenancies by other methods. In the meantime, if you have any questions about tenancy agreements or break clauses feel free to contact the team on +44 1522 503 717.
Yours in effortless property management,
Arlene Alegre-Wood


Tags

break clause, buy-to-let, buy-to-let landlord, landlord, tenancy agreement


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