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Break clause in tenancy agreement

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MyNameIsUrl
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Break clause in tenancy agreement

#255827

Postby MyNameIsUrl » October 4th, 2019, 11:55 am

A young relative is about to rent a house, and the 12-month tenancy agreement includes a 6-month 'break clause'. I'm unsure of how this works to benefit either the tenant or landlord - a 6-month agreement seems to me to be simpler, without risks of misunderstandings later.

Googling, plus reading of the break clause itself, shows that either landlord or tenant can give 2 months notice to terminate at the end of month 6, or if not the next opportunity is at the end of month 12. By contrast, a 6 month agreement could terminate (with appropriate notice, if allowed to be rolling monthly afterwards) at the end of any of months 6 7 8 9 10 11 or 12.

So have I understood correctly? If a tenant wants to rent for 6 months, either agreement will do. Only after that initial 6-month period does the 12-months-with-break agreement reduce flexibility.

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Re: Break clause in tenancy agreement

#255926

Postby Hariseldon58 » October 4th, 2019, 5:59 pm

A 12 month tenancy as described offers a benefit to the landlord, a 12 month agreement is generally preferable to 6 months, provided the tenant is satisfactory from the landlords perspective.

No need to search for a tenant between months 6 and 12 with its obvious benefits of reliable cash flow, reduced voids, less paperwork and hassle. The break at 6 months gives the landlord a chance to end an unsatisfactory tenancy and some flexibility if circumstances change.

From the other side of the contract. The tenant has more certainty of accommodation, if he is not sent packing at the six months point and the flexibility to leave early if circumstances change or the property proves satisfactory.

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Re: Break clause in tenancy agreement

#255928

Postby Arborbridge » October 4th, 2019, 6:16 pm

MyNameIsUrl wrote:
So have I understood correctly? If a tenant wants to rent for 6 months, either agreement will do. Only after that initial 6-month period does the 12-months-with-break agreement reduce flexibility.


I think that is broadly correct. The first six months is in the manner of a try out from bothsides. The next six months can be either a fixed term giving both sides some certainty for planning, or just allowed to roll on as a monthly SPT - which could go on for years.

In practice, if one of my tenants wanted to leave early, there isn't much one can do. It's not worth getting into a tizz about it: if they need to move on, so be it. I'd make it clear that if I don't rent out again at the appropriate time, they would be liable with the missing rent. So far, there's been no problem and we've parted on good terms.

Arb.

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Re: Break clause in tenancy agreement

#255951

Postby GoSeigen » October 4th, 2019, 7:52 pm

MyNameIsUrl wrote:A young relative is about to rent a house, and the 12-month tenancy agreement includes a 6-month 'break clause'. I'm unsure of how this works to benefit either the tenant or landlord - a 6-month agreement seems to me to be simpler, without risks of misunderstandings later.


Very much agree, just going for the six-month contract achieves broadly what the parties want and is clearer. If after the six months both parties want a further fixed period,just sign another agreement.

The exercise of break clauses with ASTs is VERY tricky to understand from a legal point of view. I doubt even 5% of experienced landlords truly understand how it works. I studied it carefully barely a year ago yet would be hard pressed to describe accurately how it works.

So have I understood correctly? If a tenant wants to rent for 6 months, either agreement will do. Only after that initial 6-month period does the 12-months-with-break agreement reduce flexibility.


Now I'm going to try to explain after all! The bizarre thing is that even if the landlord exercises his break after six months, the tenant can choose whether to leave or not! If he stays the tenancy becomes a statutory periodic tenancy [this is defined in law] and the Landlord still has to apply to the court for possession.

On the other hand, at the end of the fixed period of an AST the tenant can just stop paying rent and walk out without giving any notice to the landlord (google "effluxion of time"). So I guess the 12-month contract with 6-month break is of benefit mainly to the LL, because in order to leave after six months the tenant would now have to exercise his break and the landlord, knowing the tenant is leaving, can market the property.

GS


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