Serving Break Notices and Section 25 Notices: Practical Guidance for Commercial Landlords and Tenants

The commercial property market continues to evolve, with economic uncertainty, changing occupational requirements and increased scrutiny of lease terms all influencing how landlords and tenants approach their property strategies. Against this background, getting the basics right remains critical. One area where mistakes are still frequently made is the service of lease notices.

Two of the most significant notices in a commercial lease context are break notices and Section 25 notices. Both can have serious financial and strategic consequences if handled incorrectly.

This article highlights some of the key issues that landlords and tenants should be aware of when dealing with these notices.

A break notice is a contractual right contained within a lease that allows one or both parties to bring the lease to an end before the contractual expiry date. Break clauses are commonly exercised by tenants seeking flexibility, but landlord break rights are not uncommon, particularly in redevelopment scenarios.

The courts take a strict approach to the interpretation of break clauses. This means that both the form of the notice and compliance with any conditions attached to the break must be exact. Even relatively minor errors can result in the break being ineffective.

The lease will usually specify how much notice must be given, often six months, and how that notice must be served. This may include specific requirements as to method of service, the address for service or the parties on whom notice must be served. Failure to comply with these provisions precisely can invalidate the notice.

Many break clauses are conditional. Typical conditions include payment of all rent and other sums due up to the break date, compliance with repairing obligations and the requirement to give vacant possession. If any condition is not satisfied in full, the break will usually fail and the lease will continue.

Once served, a break notice is generally irrevocable. Careful planning and early advice are therefore essential before taking this step.

Section 25 notices are statutory notices served by landlords under the Landlord and Tenant Act 1954 in relation to protected business tenancies. They are used either to bring a lease to an end or to initiate the lease renewal process.

A landlord may serve a Section 25 notice either proposing terms for a new lease or opposing renewal altogether. Where renewal is opposed, the landlord must rely on one or more of the statutory grounds set out in the Act, such as an intention to redevelop or to occupy the premises for its own business.

Timing is critical. A Section 25 notice must be served no less than six months and no more than twelve months before the termination date specified in the notice. Service outside this window will invalidate the notice.

The notice must also contain prescribed information, including details of the landlord and tenant, the proposed termination date and, where relevant, the grounds of opposition. Errors or omissions can expose the notice to challenge.

Once served, a Section 25 notice cannot be withdrawn or amended without the tenant’s agreement. It is also important to note that if a tenant has already served a Section 26 request for a new lease, the landlord cannot then serve a Section 25 notice and must instead respond to the tenant’s request.

Both landlords and tenants should diarise key dates well in advance and consider taking advice at an early stage. Notices should always be checked carefully against the lease terms and statutory requirements, and clear evidence of service should be retained.

In the current commercial climate, the correct use of break notices and Section 25 notices can have a significant impact on the value, flexibility and management of commercial property interests.

Thomas Flavell & Sons’ Commercial Property Team advises landlords and tenants across a wide range of commercial property matters, including lease renewals, break clauses and the service of statutory and contractual notices.

The team provides practical, commercially focused advice to help clients avoid costly mistakes and protect their position, whether they are seeking flexibility, planning redevelopment or managing an existing portfolio.

If you would like advice on serving or responding to a break notice or Section 25 notice, please contact a member of the Commercial Property Team.