The High Court in Vistra Trust Corporation (UK) Ltd v CDS (Superstores International) Ltd [2022] EWHC 3382 (Ch) provided practitioners with instructive guidance on the interpretation of the validity of break notices, and a timely and welcome reminder on the limitations of a tenant’s ability to serve a request for a new tenancy pursuant to section 26 of the Landlord and Tenant Act 1954.
Vistra successfully applied for summary judgment of its claim for a declaration that its lease of premises to CDS, trading as The Range, would terminate on the break date specified in a break notice served by, and on, the parties’ predecessors in title and that a subsequent request for a new tenancy of the premises by CDS pursuant to section 26 of the 1954 Act was therefore invalid.
Key points
Practitioners should take note that:
- The courts are unlikely to imply maximum periods of notice into standard break clauses; and
- A tenant will not have security of tenure under the 1954 Act if its predecessor in title has served a valid break notice
In a two-pronged defence rejected by the court, CDS asserted that it had an arguable case that the break notice served was invalid as, among other reasons, it was served four years and two months before the alleged break date and, in the alternative if the break notice was valid, CDS was not precluded from serving a request for a new tenancy on the basis that CDS was the successor in title of the party which served the break notice and was therefore not “the tenant” for the purpose of section 26(4) of the 1954 Act.
During its long life, the 1954 Act has provided fertile ground for litigation. Notwithstanding its age (and noting that next year is its 70th anniversary) this case illustrates that the job of the courts in closing the traps that lurk within its provisions is not yet complete. Is this another example of why the 1954 Act should be reviewed by the Law Commission as previously planned?
The break notice
While CDS sought to attack the validity of the break notice originally served by its predecessor in title (B&Q Ltd) on several counts (including the dubious proposition that a missing gap before and after an ampersand would leave a reasonable recipient in doubt as to the party purporting to serve the notice), of most interest is the argument that the service of a break notice four years and two months before the purported break date was too long prior.
The court was referred to Multon v Cordell [1986] 1 EGLR 44, where it was held that an option for a renewal lease could not be exercised three years before expiry of the existing lease.
The option in Multon was exercisable three months before expiry of the existing lease (which had a contractual term of 35 years) with a pre-condition that there be no existing breach of tenant covenants at the date the option was exercised. In light of this, the court found: (i) the parties had clearly contemplated that notice would be given during a brief period before expiry of the lengthy term of the existing lease; and (ii) consideration of tenant breaches of covenant late into the term should be taken into account. As the option notice was served three years before expiry of the contractual term, the landlord was unable to consider said breaches and therefore the option notice was invalid as it was not served at a reasonable time.
Distinguishing Multon from the case at hand, Judge Hodge KC found that the break clause here was “very differently worded”. It was held: “The break notice has to be exercised not less than six calendar months prior to the break date, but there is no provision for any maximum period of notice; and I see no reason to imply any term that the notice is to be given only a reasonable time before a date six months before 11 February 2023.”
This judgment provides clear and important guidance that no maximum period of notice is likely to be implied into standard break option wording (ie, where break notices should be served on “not less” than X months’ notice).
The section 26 request
Section 26(4) of the 1954 Act provides: “A tenant’s request for a new tenancy shall not be made if the landlord has already given notice under the last foregoing section to terminate the current tenancy, or if the tenant has already given notice to quit or notice under the next following section; and no such notice shall be given by the landlord or the tenant after the making by the tenant of a request for a new tenancy.”
CDS argued that it was not “the tenant” for the purpose of section 26(4) as another tenant, its predecessor in title, served the break notice. In support of this proposition, CDS referred the court to the Landlord and Tenant Act 1927, which distinguishes between a present tenant and predecessors in title.
The court robustly rejected this submission on the basis that the restoration of security of tenure under the 1954 Act by the assignment of a reversion previously broken “runs counter to any sensible reading” of section 26(4) – what is lost cannot, and the authors of this piece agree should not, be saved by assignment.
This would permit tenants to take advantage of break options to request early renewals under the 1954 Act – a point rejected by the Court of Appeal in Garston v Scottish Widows Fund & Life Assurance Society [1998] 2 EGLR 73.
Connor Merrifield is a solicitor and Matthew Baker is a partner at Pinsent Masons LLP
