December 14

UK Landlords: Weighing the Pros and Cons of Break Clauses

As a landlord in the UK, you have two main options when it comes to break clauses in your tenancy agreements - you can choose to include them or not. Both options come with certain risks and potential upsides that are important to consider.

Including a break clause gives the tenant the right to terminate the tenancy early (usually at 6 months) without having to provide a reason. The main advantage for you as the landlord is that if issues arise with the tenant, you can regain possession of your property more quickly. Without a break clause, you generally cannot terminate the tenancy until the fixed term is up, unless there are grounds for eviction.

However, there is a risk to you in including a break clause - if the tenant does decide to leave at 6 months, you have to pay letting agent fees all over again to find new tenants (depending on your specific agreement with the agency). With Ezytrac, for example, there is no recurring fee but you pay an initial finders fee at the start and nothing after this. If the tenant stays over a year, this one-time fee is lower compared to what you'd pay if they leave earlier.

So if the tenant breaks the contract at 6 months, you have to pay those letting fees all over again, increasing your costs. Based on Ezytrac's average tenancy length of 27 months, this re-letting risk is significant.

The alternative is not including any break clause in the contract. This guarantees the tenant will stay for the full term barring an eviction. However, if issues come up, you can give notice at month 10 but cannot regain possession until month 12 at the earliest.

So which option is better depends on your risk tolerance. Our recommendation is to omit the break clause but get both rent and legal insurance, budgeting around £250-300 per year. This protects you financially in case the tenant defaults or causes other problems. With this protection, you avoid paying repeat letting fees while still having means to mitigate problem tenants.

We're happy to discuss this further and help landlords weigh the right decision for their investment property situation. Please reach out with any questions!

Brett


Tags

break clause, Rent & Legal Insurance


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