Tenancy Renewals and Break Clauses

The radical camp interprets the Housing Act 1988 very literally.  An assured shorthold tenancy (or Short Assured Tenancy in Scotland) must by definition be a 'fixed-term tenancy granted for a term certain of not less than six months' (section 20,  Housing Act 1988).  The argument therefore runs that the term can be neither fixed nor certain if it contains a break clause. Such an argument, presented in court, could lead to difficulties of repossession.  It should be added, however, that many thousands of repossession cases pass through the county courts every years. In our experience,  assured shorthold tenancies including break clauses have been accepted by judges as perfectly valid and until a case is passed to the Appeal Court, there will be no definitive answer.

The argument for the inclusion of break clauses is equally compelling. Firstly the inclusion of a break clause has been (and still is in most residential and commercial tenancies) a common feature of tenancy agreements for centuries. Yet the Act does not specifically state that the inclusion of a break clause is not permitted in an assured shorthold tenancy. We can only guess at the true intention of the legislators, but it is not unreasonable to suppose that this issue would have been made clearer within the Act if break clauses were not intended to be used.

Secondly, forfeiture clauses within a tenancy agreement can also act to terminate a fixed-term tenancy agreement prematurely and the Housing Act 1988 supports this view explicitly. Where a letting is an assured fixed term tenancy, the court is precluded from making an order for possession on Grounds 2 and 8, or any of those in Part II of Schedule 2 (except for Grounds 9 and 16) unless the terms of the tenancy make provision for it to be brought to an end on the ground in question.  To quote from section 7(6) of the Housing Act 1988:

'The court shall not make an order for possession of a dwelling house to take effect at a time when it is let on an assured fixed-term tenancy unless ....the terms of the tenancy make provision for it to be brought to an end on the ground in question (whether that provision takes the form of a provision for re-entry, for forfeiture, for determination by notice or otherwise).
Thirdly, there is a certain amount of case law to support this point of view.  A case involving a Housing Association wishing to expel a tenant (Eton College v Bard [1983] 2 All ER 961) was upheld. A  long lease granted by the association included a provision that the lease should determine on a tenant ceasing to be a member of the Association.  This was the break clause.  It was held that this provision did not prevent the tenancy being for a term of years certain for the purposes of the Leasehold Reform Act 1967.

Finally, in Drafting Residential Leases, Charles Bennett (Barrister, 1990 ), this housing lawyer advocates, where necessary, the inclusion of a break clause in an assured shorthold tenancy with the strict proviso that neither the landlord nor the tenant must be given the option to terminate within the first six months (since such an option would prevent the tenancy from being 'for a term certain not less that six months)'.  Charles Bennett recommends that such a break clause could take the following form:
'Either the Landlord or the Tenant may terminate this tenancy by giving ........... months notice in writing to the other; but no such notice shall be given to expire before   ...........     19 ....'
In the meantime, landlords and agents should not take fright.  The use of break clauses in assured shorthold tenancies is very widespread and any move by the courts to make such  leases null and void would be met by tremendous opposition.  In the meantime, we shall have to wait for an official verdict through the courts.