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The recent case of Goldman Sachs International v Procession House Trustee Ltd [2018] illustrates the difficulties that the parties to a lease may have when exercising a break option.

In this case the tenant, Goldman Sachs, occupied office premises under a 25 year lease at a rent of £4 million per year. The terms of the lease provided that a break option would be exercisable by the tenant after 20 years subject to there being no rent arrears and “subject to the tenant being able to yield up the premises with vacant possession”. The yielding up provision in the lease (clause 11) stated that “unless not required by the landlord, the tenant shall at the end of the term, remove any alterations or additions made to the premises (and make good any damage caused by that removal to the reasonable satisfaction of the landlord) and shall reinstate the premises to their original layout and to no less a condition than as described in the Works Specification”.

When the time came to exercise the break option the tenant argued that although there was an obligation to give vacant possession the additional provisions of clause 11 did not relate to the break option. The tenant argued that clause 11 contained a separate obligation.

The landlord argued that the tenant must comply with the yielding up provisions (reinstating the premises to their original layout) as a condition of exercising the break clause.

The court agreed with the tenant and held that the drafting of the break option did not make the break option conditional upon reinstatement of the premises. The option could be validly exercised provided there were no arrears and vacant possession was given.

This case highlights the importance of clearly drafted break options in a lease and highlights the need to take legal advice on such documents to avoid the expense and delay in determining what is meant by a clause through the court.

If you require further information on anything covered in this article please contact our Commercial Property team or your usual contact at the firm on 01484 821 500.