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B is for Break Clause

A-Z of Letting Your Investment

B is for Break Clause:

What is it and how it can benefit both parties

A break clause is inserted into a tenancy agreement, most often an Assured Shorthold Tenancy (AST) when the fixed term is more often a year or more.  The break clause will be worded in such a way as to allow the tenant or the landlord to give two months written notice after a specific date or period of the tenancy.  This would allow either party to effectively terminate the tenancy earlier than the original fixed term.

Advantages and Disadvantages

Break clauses are traditionally thought to be of greater benefit to the tenant as they have the security of a fixed term tenancy but with the flexibility to exercise the break clause should their circumstances change.  An example of how this might benefit the tenant is if the original fixed term is for 12 months or more and during the tenancy the tenants circumstances change and they need to leave they, by exercising the break clause they are not financially liable for the remaining rent. The downside as you may realise is that the landlord is slightly more venerable to losing his tenant before the end of the fixed term.  However, in the current economic climate it may well be the landlord who exercises the break clause as he may wish to sell his property.

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