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SRRoberts
01-11-2005, 17:32 PM
My ARLA agent (currently marketing my property) has advised me that a 'break clause' is only inserted if requested by the tenants and that it is not inserted as 'standard'. Is this correct? I thought that a break clause allows either landlord or tenant to give 2 months notice after a particular date or period of tenancy. I also understand that a break clause is sometimes inserted in a 'fixed term tenancy' and typically if a fixed term is for a year or more. What exactly is a 'fixed term'? The AST supplied by the agent, states the commencement date, 'To' and finishing date, 'From'. Does this make it a fixed term? Please help.

mjpl
01-11-2005, 17:51 PM
A break clause must be mutual. It cannot be for one party without falling afoul of unfair terms.

A break clause is used to break a contract during the fixed term.

A fixed term is one that runs for a specific amount of time or has an end date. A periodic is indefinite.

Often a break clause does not form part of a standard agents tenancy agreement and PaulF believes that such a clause must always be individually negotiated with proof of such being available.

The particular date you refer to is usually four months. This means that two months notice can be given by either party after four months, thus ensuring that the six months assured term is satisfied.

A break clause can be useful on a years tenancy as it gives the Landlord some security if the tenants turn out to be trouble. However, it also gives the tenant the right to leave early.

MrShed
01-11-2005, 23:03 PM
As I understood it mjpl(although you definitely have more experience in this than myself!) I thought that a break clause could be for tenant ONLY, as it if it was also for the landlord then it would be breaching the tenants statutory rights?

PaulF
02-11-2005, 16:40 PM
Mr Shed............brilliant! Absolutely spot-on!

A break clause cannot be part of the standard terms if it applies only to be in favour the landlord (please mjpl do not refer to a "standard agents tenancy agreement" - there's no such thing, and if they are using a 'one-size-fits-all' agreement they are lazy and it will come back to haunt them!) otherwise it must be negotiated. There's really not much point in doing this as the statutory notice periods are usually more than enough to end the tenancy when it becomes periodic.
A landlord cannot offer a fixed term with one hand then negotiate an option to end it prematurely with the other; however the tenant can be offered the opportunity to give notice to determine before the end of the fixed term if the landlord allows it by serving a specified period of Notice.
Please remember there is no obligation on the tenant to give Notice to end the fixed term; they only have to give Notice when it becomes periodic! (People keep forgetting this!)
About the most misleading piece of advice on this thread was the following bit by mjpl (I know he's only trying to be helpful):
The particular date you refer to is usually four months. This means that two months notice can be given by either party after four months, thus ensuring that the six months assured term is satisfied.

MrShed
02-11-2005, 16:52 PM
Paul just with regards point 1...just out of interest, would a seperately negotiated term stand up in a repossession case anyway? As I understood it(I could perhaps be completely wrong), this seperate negotiation would become a standard common-or-garden contract, and breach of contract in this way, I thought, could only be dealt with purely on monetary loss in small claims. I am probably totally wrong though!

PaulF
02-11-2005, 17:07 PM
Don't quite understand your meaning!

MrShed
02-11-2005, 17:16 PM
Apologies I waffle on sometimes! I shall clarify.

- If you negotiate a seperate clause, as you have said is the only way to do it in your response, then this is a "standard" contract, am I correct? Not a "tenancy" contract or anything.

- It was my opinion, whether it is correct or not I do not know, that if a standard contract is breached then the courts cannot enforce the completion of the contract, they can only award the financial loss incurred by the plaintiff. So in this case, if the tenant is given 2 months to leave in the fixed term, and they do not leave, then this "eviction" cannot then be enforced by a court, as it is not a tenancy agreement, just a standard contract.

I could be talking absolute rubbish though. Tell me if you need further clarification :p

PaulF
02-11-2005, 17:27 PM
Individually negotiated terms are referred to as "Special Tenancy Conditions" which removes them from the jurisdiction of the Housing Act 1988, but they cannot prejudice or circumvent the individual's statutory rights. They have to be clearly shown on an AST as such.

I think you mean "term" not "contract". There is a habit of "standard terms" being referred to all the time to cover everything - they don't, there are "core, standard and individually negpotiated terms", all having a different status. There are "core terms" which means those not governed by statute but refering to rent, demise and length of tenancy, and standard terms extending to the obligations and liabilities both written and implied of the landlord & tenant to each other that are covered by the Housing Acts and Landlord & Tenant Act amongst others. There's nothing to stop anyone leaving out certain clauses if they wish to; however they should bear in mind that if it isn't clear then it's open to interpretation, and that nearly always favours the tenant. Don't forget, there's no absolute requirement to draw up an AST in writing, it can be created orally.

MrShed
02-11-2005, 17:44 PM
Ah ok thanks paul :D

mjpl
02-11-2005, 18:12 PM
Paul,

If your contention is correct, why do ARLA whom you refer to continually have the following in their literature:

What Is A “Break-Clause”?
This is a clause sometimes inserted in a fixed term tenancy, typically if the initial fixed term is for a year or more. A break clause will usually be worded in such a way as to allow either landlord or tenant to give two months written notice at any stage after a particular date or period of the tenancy, thus terminating the tenancy earlier than the end of the original fixed term.

And the legal courses written by Marveen Smith and Francis Burkinshaw both cover in some detail the use of a break clause. It is of great concern to me that ARLA's tuition and examining board have such a difference of opinion.

In addition to the above we have activated break clauses on countless occassions over the years with no difficulty at all.

Depending on individual circumstances, both landlords and tenants are sometimes reluctant to commit to a fixed term tenancy unless it includes a provision that allows for the tenancy to be terminated before the expiry of the original fixed term. This type of provision is an option to determine. For an assured and assured shorthold tenancies, the landlord may not use the break clause to overide the statutory provisions, and so the Landlord will be required to provide at least two months notice to determine otherwise the break clause could be declared void.

As the common law requirement on the tenant's part requires only a reasonable amount of notice, is is common that both parties agree in the contract to two months written notice to terminate the fixed term. This has the advantage of a more equitable notice arrangement.

Furthermore I have checked your link with regards to the new Unfair Terms legislation and they are perfectly satisifed with a break clause provided it is mutual and allows for a suitable amount of notice as well as ensuring that the notice is the same for both parties.

I have seen many, many agreements that allow for two months notice to be given after four months. In fact this was a clause drafted by Judienne Wood for an international company I worked for. Please explain where this is misleading?

The one point I acknowledge is that there is no such thing as a standard agents agreement. I meant agent's standard agreement and was referring to the use of the word standard by the original poster.

Finally, you have made mention to the Landlord not being able to offer a fixed term with one hand and take it away with another. Why ever not?? The tenant's statutory rights will have been met after the initial six months and the tenancy agreement has a mutually agreed break clause signed by both parties offering equal terms.

MrShed
02-11-2005, 19:10 PM
But mjpl if a break clause is allowed, then what on earth is the point in having any kind of fixed term?

Energise
02-11-2005, 20:10 PM
Marveen Smith

"Break Clauses

If either party wishes to have the right to break the fixed term a clause should be included in the agreement covering the following:

When the right to break can be triggered.

This should be on a specific date or after a certain period of time;

The notice period to be given. Notice should always be in writing and preferably end at the end of a period if the tenancy;

State to whom notice should be given;

Method of service, usually first class post or by hand;

State that the tenancy is determined at the end of the period of notice without taking away the rights of the parties to sue for breach.

It is also important that the term of the tenancy as shown in the tenancy agreement refers to the break clause, otherwise there could be a conflict.

Example
The tenancy is for a term of one year but subject to clause (insert number) below.

If a landlord has a break clause in an AST the notice period must be 2 months and not 60 days. The break clause should also state that the notice period is triggered by serving a Notice under section 21 of the Housing Act 1988.

If the tenancy is not under the Housing Act 1988 then the landlord and the tenant only has to give one period’s notice, which means one month if the tenant pays monthly or one quarter if the tenant pays quarterly; although a longer period may be negotiated between the parties. However if the tenant is an individual the landlord cannot impose a break clause giving two months’ notice on the tenant as that would be an unfair term, unless the clause is individually negotiated between the parties. (See our article on Unfair Terms in Consumer Contract Regulations 1999)."

mjpl
02-11-2005, 20:42 PM
Thank you energise, I nearly missed my train typing out that last one so did not check spelling or research it any further.

MrShed, simply because that it what they agreed to! No one forced either party to include the clause nor to sign the agreement. The whole point of a contract is to set out the terms under which an agreement has been reached. The OFT are only interested in making sure that clauses are fair. In this instance both parties have the same rights, why would it not be fair?

I would be interested to know what side of the fence lawstudent would sit on this one.

PaulF
03-11-2005, 09:21 AM
One or two questions and answers?

Paul,
It is of great concern to me that ARLA's tuition and examining board have such a difference of opinion.The Examination Board for ARLA/NAEA Technical Award does not give opinions on interpretations, they merely set the syllabus and exams, and mark the papers.
Finally, you have made mention to the Landlord not being able to offer a fixed term with one hand and take it away with another. Why ever not?? Because you won't be able to impose it on the tenant if he doesn't want to be bound by it - see Energise's missive from Marveen Smith which explains it well. Better still phone her!The tenant's statutory rights will have been met after the initial six months and the tenancy agreement has a mutually agreed break clause signed by both parties offering equal terms. Are you talking about a break clause after the initial fixed term of 6 months or after 6 months for a fixed term of a longer duration? I think you mean the latter

mjpl
03-11-2005, 09:40 AM
Thanks Paul,

In answer to your points:

1. I think you know what I mean. If an ARLA course instructs me on the use of break clauses but the examiner (you) feel that it is invalid, who is right and how will the paper be marked.

2. I see nothing in Marveen Smith's statement that disagrees with what I have said. In fact it appears to confirm my thoughts exactly. I can only imagine that you are referring to the need for such a clause to be individually negotiated, but I have never disagreed with that.

3. I do mean the latter.

S J
03-11-2005, 10:16 AM
Break clauses only operate for tenants, to assert otherwise would be purely misguided. The landlords equivalent is forfeiture.

mjpl
03-11-2005, 10:30 AM
Forfeiture refers to the Landlord terminating the tenancy because of a breach of the agreement.

In this instance we are talking about a clause that requires an adequate amount of notice to be given in the required manner to terminate the tenancy.

Rather than blanket statements, can someone give me a specific reason why a break clause cannot be operated by a Landlord.

S J
03-11-2005, 11:43 AM
from what has been stated so far on the issue of break clauses (albeit authoratitvely), its very unlikely....

Energise
03-11-2005, 11:51 AM
mjpl "Rather than blanket statements, can someone give me a specific reason why a break clause cannot be operated by a Landlord."

No, but Tessa Sanderson (solicitor Landlord-Law) agrees with you that break clauses can apply to both parties.


(Edited I originaly quoted the wrong person)

S J
03-11-2005, 12:20 PM
isnt Tessa Sanderson the ex javelin thrower??

Energise
03-11-2005, 12:26 PM
energise, SJ is stating the exact opposite! why have you quoted him?


Whoops now corrected. :eek:

MrShed
03-11-2005, 14:32 PM
OK mjpl I see your point. But what I mean is, for example, if you have a year AST with a break clause allowing either side to give 2 months notice, after the first 6 month. Why not just make it a 6 month AST ?? What benefit is there from using the break clause method over a 6 month AST? The only slight benefits I can think of are:

- 2 months notice instead of 1 months on the part of the tenant.

- It would perhaps be slightly less obvious to the tenant that they could leave prior to the year if it was a break clause instead of an AST.

RichieP
03-11-2005, 20:24 PM
It would perhaps be slightly less obvious to the tenant that they could leave prior to the year if it was a break clause instead of an AST.

I think that's about right. I borrowed an AST from a friend of a friend who has several properties. He had this clause, and others that could be seen as a bit dubious. It's obvious he's got them there to be able to get rid of the tenants easier after 6 months if he wants to, knowing that the majority aren't aware of their rights.

I did take out these dodgy clauses before anyone asks. :rolleyes:

MrShed
18-11-2005, 22:32 PM
Sorry to dredge up an old thread.....but mjpl it appears I owe you an apology! Having done a bit of extra reading, it appears that not only is a break clause wholly valid, it can be part of the standard terms, and not negotiated seperately, according to the OFT. This provided that, as you say, it gives both parties the same right of cancellation, and also that it does not lead tenants to believe, wrongly, that they can be evicted at any point due to this clause.

mjpl
30-03-2006, 14:35 PM
Thank you MrShed. Been away for a while. Toys are back in my pram now.