Break Clauses – A Warning to Landlords

A Warning to Landlords following the recent decision in Sterling House Ltd v International Baccalaureate Organisation (UK) Ltd [2026] EWHC 2680 (BP) (20 October 2026)

Decision

The High Court has dismissed a landlord’s claim that its tenant’s break notice had failed to terminate the lease as a result of communication between the landlord and tenant prior to the break date with respect to sums due under the lease even though the tenant had not fully complied with break clause pre-conditions.

What happened?

The tenant served notice on its landlord purporting to terminate its lease on 23 February 2026.

The lease required annual rent to be paid in advance on the usual quarter days and insurance rent to be paid on demand, and provided that the break notice would be of no effect if any sum remained outstanding at the termination date.

On 6 February 2026, the tenant’s facilities manager emailed the landlord’s agents requesting the invoice for the January to March 2026 period, explaining that the tenant needed to pay the invoices before handing back the building. He chased again on 10 February 2026.

The agents responded with a standard covering email referring to the lease terms, but the accompanying invoice covered rent only to 23 February 2026.

The tenant paid the invoiced amount, but this left £45,000 outstanding.

A demand for insurance rent of approximately £2,300 was hand delivered to the tenant’s registered office at 3.00 pm on Friday 20 February and paid on 25 February 2026.

What the Court had to decide?

The Court was asked to consider if the landlord was estopped from relying on the unpaid balance of the rent and whether this also extended to the insurance rent and whether the tenant had the opportunity to pay this before the break date.

What did the Court decide?

The Court held that the invoice clearly represented what the landlord required to be paid before handover. The tenant’s reliance was reasonable given its initial request, subsequent chaser and the clarity of the invoice about the sums due at the break date.

Although the tenant had not mentioned insurance rent, the context made it clear that it was requesting details of the amount required for the handover to take effect.

The demand for insurance rent did not give the tenant a reasonable opportunity to pay by midnight on 23 February.

Estoppel therefore saved a break that would otherwise have been invalid due to the tenant’s failure to satisfy the pre-conditions.

What does this mean for landlords?

This decision means that landlords, or their agents, need to be careful when engaging with tenants post service of a break notice. It is clear from what the Court decided that clear unequivocal actions by a landlord (or its agent) can undermine the strict pre-conditions set out in the break clause.

Therefore, make sure that all invoices and communications correlate explicitly with the lease (or clearly state the sums do not relate to the pre-conditions) and make sure that the tenant is given sufficient time to pay on demand sums.