Invalidity of Break Notices
The recent case of Sackville Property Select II (GP) No.1 Ltd & Anor v Robertson Taylor Insurance Brokers Ltd & Anor [2018] EWHC 122 (Ch) has highlighted the issues surrounding the validity of a tenant’s break notice and the importance of serving notice correctly.
The tenant’s break notice in this case was served on behalf of the assignee of the registered lease, who had not yet been registered as the proprietor of the leasehold title.
The High Court held that notice ought to have been given by the former tenant. The equitable assignee of the term was not ‘the Tenant’ as defined in the lease, and so was not the correct party to give notice. The High Court did not agree that the assignee was entitled to serve a valid break notice, because it had not applied to become the registered proprietor of the leasehold title (in spite of an express obligation to do so).
The court also declined to find that the notice was served on behalf of the assigning tenant, who was the person who had the right to serve the break notice at the relevant time. The notice was not valid unless a reasonable person in the position of the landlord would understand that when it stated the name of the equitable assignee, it in fact meant to state the name of the former tenant. The Court found that the reasonable recipient of the notice would have been in little doubt that the notice was given on behalf of the equitable assignee rather than the former tenant. Accordingly, the Defendants could not establish that the break notice was served on behalf of the former tenant.
While the case is largely on its facts, it is a reminder of some important practical points:
- For many purposes, it is the legal tenant who has rights and powers under a lease, and until an assignee of a registered lease becomes the registered proprietor it is not strictly the tenant.
- When dealing with a lease assignment, it is important to consider if the lease is registered (and, if not, if it will be registrable following the assignment), in order to ensure that the form of the assignment is correct and that it is registered in a timely fashion.
- Parties must check the terms of any break clause carefully, and must ensure that any break notice they serve is effective. This may well require checking the tenant’s title to the lease and, if there are problems, considering serving more than one notice, to ensure that the break is exercised properly.
It is advisable that these clauses are fully understood by all the parties to the lease. Tenants may find that, although they believe the tenancy to have ended; they may still be liable. On the other hand, landlords may find that uncertainty is created by these types of conditions.