1. What is the difference between an Option to Renew and a Break Clause?

1. What is the difference between an Option to Renew and a Break Clause?

An option to renew confers on the tenant a right to continue to rent the property for a fresh term after the expiry of the current term, i.e. to renew the existing tenancy. With an option to renew, the tenant obtains another term of tenancy and the landlord is somewhat secured with rental income as agreed beforehand. As an option to renew represents a legal interest in land and affects the principles of notice and priority, the relevant tenancy document containing such option should be registered even if the tenancy period does not exceed 3 years.

A break clause, in contrast, confers rights to a party to prematurely terminate a tenancy after a certain period has elapsed or upon the occurrence of certain incidents. That is to say, a party is allowed to break the agreement before the expiry of the original term.