The Importance of Break Clauses in an Assured Shorthold Tenancy
It is attractive for many to purchase a second or even third home for investment purposes as a buy-to-let, to provide a guaranteed future income or an investment to pass on to children.
Many second property owners have chosen to deal with the administrative side of their properties on their own, in order to avoid incurring legal costs or agency charges.
The rental sector has changed over the years, and the law behind it is becoming more and more in favour of the Tenant’s rights, rather than the Landlords. Landlords who are not familiar with their legal obligations can easily fall into the trap of not putting a break clause in the tenancy agreement, this can cause major problems further down the line.
What is a Break Clause in an Assured Shorthold Tenancy?
A break clause permits either party, Landlord or Tenant, to serve notice on the other by way of Section 21 Notice under the Housing Act 1988, before the end of the term of the tenancy. Pre-COVID only 2 months’ notice was required but post-COVID this has increased to 4 months.
The minimum time before a Section 21 Notice can be served during the term is 6 months. We would, therefore, always advise that a break clause be included in any new tenancy agreement so that the earliest a Tenant or a Landlord can serve a Section 21 Notice on the 2nd month to expire on 6th month.
The reason why including a break clause is important, is that it allows a Landlord to exercise their right to evict the Tenant from the property sooner without the need to give a reason and a Section 21 Notice claim can be dealt with quickly and without need for a hearing.
There are alternative methods to gain possession of your property but these tend to only be relevant if there has been a breach of the tenancy agreement.
If you are a Landlord or an individual who has recently acquired a property as an investment, please do not hesitate to contact our Head of Dispute Resolution Maria Orfanidou at Leonard Gray LLP to discuss your legal options before entering into any new tenancy.