Tenants break notice is it validly served?

Two recent cases have highlighted the importance to a tenant of ensuring that its break notice is served on the correct party or parties, as provided for in the break and/or notices clauses in its lease. Failure to do so can render the break notice invalid and mean that the lease will continue beyond the break date.

Hotgroup Plc v Royal Bank of Scotland Plc [2010] EWHC 1241

• Hotgroup Plc’s 10 year lease of office premises from Royal Bank of Scotland Plc (‘RBS’) contained a break clause allowing Hotgroup to terminate at the end of the 5th year of the term of the lease.
• The lease specified that notices must be served both on RBS and its managing agents. When Hotgroup decided to exercise the break option it correctly served notice on RBS but did not serve notice on RBS’s managing agents until after the deadline for valid service.
• RBS considered that the break notice was invalid and took their case to Court. The Court held that the notices provision in the lease was clear in stating that any notice must also be served on the managing agents and the notice was therefore invalid.

Tenants must always be certain of who they are to serve their break notice on, as it may not be only the landlord.

Standard Life Investments Property Holdings Ltd v W&J Linney Ltd 2010 All ER (D) 220 (Jul)

• W&J Linney Ltd (‘Linney’) was granted a 10 year lease in February 2004 by its landlord, Capita Trust Company Ltd (‘Capita’).
• In November 2004, Capita granted a lease of over 100 years to Standard Life, which took effect as an overriding lease subject to the lease granted to Linney. From November 2004, Linney paid its rent to Standard Life rather than Capita and Standard Life was entitled to the reversion of Linney’s lease.
• Linney’s lease contained an option to break in 2009 which Linney decided to exercise. Linney served notice on Capita as their original landlord, rather than Standard Life.
• When the case was taken to Court it was ruled that the break notice had not been validly served.

The definition of ‘Landlord’ in Linney’s lease included, as well as the landlord named in the lease, the person entitled to the reversion for the time being and that definition was to apply unless the context required otherwise. In the context of service of a break notice, the Court considered that the ‘Landlord’ meant the holder of the current reversion, in receipt of the rental income, and in this case Standard Life would have been the correct party on which to serve the break.

Tenants must always check the current holder of the reversionary title and ensure that notice is served on that party, remembering that this may be in addition to or instead of the named ‘Landlord’ in the lease. The ownership may have changed since the lease was granted and so up to date official copies of the reversionary title should always be obtained from the Land Registry and checked against paperwork such as rent demands before a tenant serves a notice.