How to take advantage of a break clause?
Posted on 16th February 2021 at 21:10
As we approach the end of the year it is possible that there are a number of you who have a break clause coming up in your tenancy agreement.
This gives you the opportunity to end a fixed term tenancy before the agreed date – something a lot of businesses are perhaps considering now that the majority of the UK work force is working from home.
How Do You Forecast Your Sales?
If you find yourself in this situation, where a break clause is coming up and you want to change your business premises – either to somewhere bigger or to somewhere smaller, the first thing you should do is stop and breathe.
Taking advantage of a break clause should not be a knee jerk reaction or something taken lightly. As with any successful business decision it should be planned, and the numbers crunched to ensure it is the right decision at the right time. Many landlords may even require a six-month notice period if you intend to end the tenancy.
How you take advantage of the break clause depends on the lease itself and whether all stated conditions have been met. If they haven’t been met then you could be obliged to remain in the property, along with all the costs that accrues.
It is also a non-reversible decision, so once you have handed in a break notice you can’t withdraw it, so you need to ensure this is right for your business.
It’s all about the numbers
When deciding on taking advantage of a break clause, it is a good idea to have a financial controller such as Deerbridge Finance analyse your books to identify whether breaking a lease is actually the best option for your business going forwards.
Through analysing your profit and loss and cash flow projections other solutions could be presented rather than downsizing for example. There could be other savings, or potential income which could mean you could remain in your current premises if that’s what you would prefer to do.
Alternatively, if the company is in growth and larger premises are needed, there could be other options available or insight into how much could be invested at that time.
Breaking a lease could require immediate payments of any money due which can include interest payments on rent arrears, service charges or even a fee to end the tenancy.
However, without having a clear overview of the company figures and the projections as well as how these align with your business and financial goals no clear decision can be made.
How can Deerbridge Finance help?
If you know you have a break clause coming up in your lease, and you are thinking of changing premises, why not have a chat with us at Deerbridge Finance to see what the best options are for you based on your own finances, projections, cash flow and goals.
Using our extensive experience in both the financial and business world we can offer you tailored advice on your business finances which are right for you right now.
If you would like to find out more about our financial control services, just get in touch with us today.
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