Break Clause Value Calculator

A break clause looks like a free escape and is not. Exercising it usually triggers a penalty, clawback of any rent-free period or fit-out contribution, and a dilapidations claim — and then you still have to pay rent somewhere else.

The honest comparison puts the full cost of staying against the full cost of leaving, including the replacement premises. It frequently shows that staying is cheaper, which is not the answer most tenants expect.

The comparison

Cost of staying is the rent for the remaining years. Cost of breaking is the penalty, any incentive clawback, the dilapidations settlement, moving and fit-out, plus rent on the replacement premises for the same period. Both are measured over the same span so they are comparable.

Worked example

With 60,000 of annual rent and five years left, staying costs 300,000. Breaking means a 30,000 penalty, 20,000 of clawback and a 40,000 dilapidations settlement, plus 50,000 a year elsewhere for five years — 340,000 in total. Staying is 40,000 cheaper despite the lower rent on the new premises.

Break conditions are strict

Most break clauses require vacant possession, all rent paid up to date and sometimes full compliance with every covenant. Failing any condition, even by a small amount, can invalidate the break entirely and leave you bound for the full term. Take advice well before the notice date.

Frequently asked questions