Dispute over 6 month break clause in tenancy agreement

[Askari]

Hi there, I'm new to the forum and am hoping that someone can help shed some light on a very awkward situation we find ourselves in.

My wife and I are tenants. We signed a 12 month fixed term AST Agreement with a 6 months Break Clause on 06/12/10. Prior to signing the agreement we had discussed with the LA the importance of having a 6 month break clause included in the contract as we needed the flexibility to leave after 6 months if a more suitable property came up. The oral agreement we made with the LA (both prior to signing the agreement and again when we actually signed it) was that we could end the tenancy agreement and vacate the property after the initial 6 month period by providing the LA/LL with 1 month's notice. It was also agreed that the LA/LL could provide us with 2 month's notice if they wished us to vacate after the initial 6 months.

When we came to sign the agreement there was no 6 month break clause included in the contract which we pointed out to the LA. She said "no problem" and having confirmed again with us the 'terms' she handwrote in "6 months break clause" after the entry "12 month fixed term" and initialled it, as did both my wife and I. The mistake we made (in hindsight!) is that we did not insist that the LA write into the contract the terms of the 6 month break clause we'd agreed.

A short while ago we located another property to move into and decided to hand our notice in here. Being at the 9 month mark we believed there would be no problem handing in our 1 month notice as agreed in order to vacate at the beginning of October. I even rang and spoke to the LA just prior to doing so (3 or 4 weeks ago now) and she confirmed once again over the phone to me that the terms (above) were correct. On that basis we handed in our written notice but shortly afterwards received a call from the LA (a different one now - who'd taken over the previous one's role)saying that the original LA had been mistaken in telling us that we could leave any time after 6 months. She said that the 6 month break clause meant we could only leave at the 6 month point by providing 2 months prior notice (i.e. at the 4 month point) and since we had not exercised the clause we had to see out the full 12 month term.

Unfortunately other than the oral agreement made with the LA when we signed the Agreement (which of course we are arguing is also legally binding) and the written inclusion of the words "6 month's break clause" there are no other terms/conditions included. There is no reference anywhere in the contract to any required notice periods whatsoever though even with regards to the 12 month term.

Basically it now seems to be a case of their word against ours...and unfortunately & rather dishonestly they have gone back on their word!

When I pointed out to the 'new' LA that the terms of the 6 month break clause had been agreed with previous LA (who was the authorised agent at that time)and that there was nothing in our contract which either contradicted our agreement, or indeed supported her explanation of the 6 month break clause, she said that that was irrelevant. She also said that in the absence of any explicit explanation of the 6 month break clause in the contract that 'standard practise' would prevail...which according to her was the one opportunity to leave at 6 months exactly or not at all. Of course I know that that is rubbish, and that it is as much 'standard practise' to structure a 6 month break clause along the lines we originally agreed with the LA.

Anyway, we are now in a stalemate with the LA insisting we are liable for the rent until the 5th December (and she'll pursue us legally if leave and don't pay up) and we are standing our ground & insisting that an agreement was made which lawfully allows us to leave 2 months early.

I'd be grateful for anyone's comments or advice as to how best we should handle this.. We have spoken with a lawyer who thinks we have a good chance of winning our case should it go to court, but obviously it is in nobody's best interest to go that far...although we would if we had to.

Thank you in advance for your help.

[jta]

I tend to agree with your agent, you had a six month break clause which you are trying to use at the nine month point. It is a case of 'use it or lose it'.

Since you did not use it then the landlord is entitled to expect you to see out the full term.

[Askari]

Thanks for your response jta. Surely what you say though is based on the assumption that the inclusion of a 6 month break clause can only be structured and executed as a "use it or lose it" option? i.e. if you don't exit at the 6 month point you are locked in until the end of the term. I must say that my understanding of the 'law' here is that there is no statutary requirement as to how a 6 month break clause is structured/executed and it is only by it's inclusion in the contract that it becomes legally binding.

We have never encountered this "use it or lose it" interpretation of it before (not to say that it cannot be structured in the 'use or lose it way', so long as it forms part of the original agreement between the LL/LA and the tenant). We are landlords ourselves as well as having rented for 6+ years with several major Letting Agencies and in every case (including with our own tenants) the 6 month break clause is included so as to allow us/the tenants to depart at any time after the 6 month period (whether it be at 7 months, 10 months or whenever)so long as the agreed notice period is observed (either 1 or 2 months).


The point here is that the LA made an agreement with us (confirmed on more than one occasion) that the 6 month break clause was structured so as to allow us to depart at any time after 6 months by providing 1 months notice. She is now lying to cover her back. The new LA actually told us on the phone that the old LA had admitted to her that that was what she had originally told/agreed with us but that she (the old LA) now understood that she was mistaken and should not have allowed it. As far as we are concerned though, whether or not she was mistaken is neither here nor there - it is their own internal error and has no bearing on what is 'lawfully' allowed. She (the old LA) was the authorised agent at the time and we signed the agreement with her in good faith. With the LA's oral agreement/explanation forming an integral part of the written inclusion of the 6 month break clause surely that is what is legally binding?

The fact that our oral agreement with the LA regarding the 6 month break clause was not written into the contract is what is causing the problem (lesson learnt!!!). It would be fine of course if the Letting Agents were honest and honourable, however, they are not and if they just continue to insist that they did not agree it with us then it simp ly becomes a case of their word against ours. These are not reasonable people we are dealing with.This particular Letting Agency have a terrible reputation in the area (which we only subsequently discovered)for being disorganised,unprofessional,greedy and dishonest..which we can happily say has been the exception to the rule in our experience of other Letting Agencies!

[jta]

My understanding of a 'six month break clause' is that you can either give notice to leave on or before the 4 month point to leave at six months or possibly give the notice at six months to leave at 8 months, either of these scenarios has been argued here.

However there are members here with a far greater understanding of break clauses than me so I hope one of them will also answer you.

[Askari]

Thanks again jta - I appreciate your response.

[Snorkerz]

I kind of agree with jta.

I may seem a little more harsh though - there is no 6 month break clause in your contract. There is a handwritten note that says there is, but the clause is not there.

You may possibly have a claim against the agency who set up the amended AST as they should have known that the note would have no effect (but how do you prove the financial loss?) but so far as I can see, the current landlord has no obligation to release you.

Maybe a deal? We'll go in a fortnight if you'll accept a couple of months rent to surrender the tenancy? That way, both parties have a chance of benefiting.

[Askari]

Thanks Snorkerz. Surely though an oral agreement with the LL's authorised agent (in fact the LL owns the agency & the LA is her employee) is contractually binding in itself?

I agree that the mere inclusion of the words "6 months break clause" on its own could be pretty ambiguous, but at the very least it demonstrates that there was an intention to include one, and that, along with the 'oral clause' if you like gives it weight?

Again, ultimately it seems to me that it boils down to the LL/LA being honest/honourable/fair and admitting that it is all a bit of a mess but that, yes, that's what was agreed so that's the agreement we'll stick too. Perhaps I have too much faith in human nature though!

[westminster]

Surely though an oral agreement with the LL's authorised agent (in fact the LL owns the agency & the LA is her employee) is contractually binding in itself?
Yes, oral agreements are binding but I question whether it's possible to serve notice under a break clause where the terms of the clause and the effect of the notice (i.e. to end the fixed term at notice expiry) are not set out precisely in writing. A notice under a break clause has a legal effect; it's not the same as an oral agreement for, say, the LL to remove an unwanted wardrobe before the start of the tenancy.

[Lawcruncher]

If a party is to have a right to break you need to know:

(a) the minimum length of notice required

and

(b) either:

(i) when it may be served

or

(ii) when it can or must expire.

If either element is missing there is uncertainty. If there are any cases where the court has supplied a missing element they have not come to my attention.

The rules for the interpretation of documents are quite complex; whenever I begin to think I understand them the courts move the goalposts. Very roughly and according to my understanding: When something is put in a legal document there is an assumption that the parties meant something by it and the court will try to extract a meaning. If the provision is ambiguous it will be "construed against the grantor" which in the case of tenancies means it will be interpreted in favour of the tenant so long as the result is not absurd. If some essential ingredient is missing the court will declare the provision void for uncertainty. If the provision is nonsensical the court will say so. Whilst rectification may be ordered where there is a clear mistake, there is an assumption that a legal document represents some sort of finality. Where a provision is clear and does not fly in the face of commercial reality courts are reluctant to go over the negotiations between the parties to try and see what they agreed because it is recognised that things may change during the course of negotiations. If a party is legally represented and the document does not reflect what he agreed he is more likely to have a claim against his lawyer than against the other party.

In this case the provision such as it is incomplete. Writing in "6 months break clause" and no more is singularly unhelpful as not only are the two elements mentioned above missing, but there is no indication as to who has the right to break. I think therefore it has to be void for uncertainty, which means it cannot have any meaning including the one proposed by the second agent.

However, that is not the end of the matter. There is a difference between agreeing there should be a right to break and failing to put in an adequate provision (though if clear terms had been agreed rectification may be available) and an agent putting in a provision and assuring the tenant that it has an effect that it does not have - that amounts to misrepresentation.

Whatever the law may be, I think a twofold approach is required and you need to argue:

1. The first agent represented that you had a right to break at any time after six months and that was confirmed by her subsequent actions. The second agent cannot deny that since she has acknowledged what the first agent said by denying what she said was correct.

2. If the second agent argues that there is a right to break but only on the terms she suggests she is acknowledging that there is a right to break. However, the terms are not specified and accordingly (having regard to the rule that a provision must be construed against the grantor) terms must be read in that favour the tenant and the standard is that the tenant can exercise the right so as to terminate the tenancy at any time after six months have elapsed by giving one month's notice.

[westminster]

Bravo, Lawcruncher.

[Askari]

Thank you Lawcruncher - a huge help. I'm even more confident now that we have a case...and can argue it.