Leases — Break clause — Assignment of leases — Assignment not registered — Whether notice properly served — Judgment for tenant
Three leases were executed by the first plaintiff as the tenant of parts of premises at Kings House, Bond Street, Bristol, and the then landlords. The first two leases were for a 25-year term from June 24 1985 at a rent of £135,000 pa for the first lease, and a rent of £58,400 for the second lease. Both were subject to rent review provisions. The third lease also demised other parts of Kings House to the first plaintiff for the term then unexpired under the first lease. All three leases included by reference the tenant’s break clause allowing the tenant “by not less than nine months written notice served upon the landlord on 24th June 1995 (time being of the essence) determine this demise on the 24th June 1995 upon condition that the tenant shall thereupon (or on the earlier vacation of the property) pay to the landlord … a sum equal to six months rent payable … in respect of the period of six months immediately preceding the expiration of the said period…”.
As a result of a reorganisation, the first plaintiff in 1990 became the wholly owned subsidiary of the second plaintiff and ceased to trade, holding the leases upon bare trust for the second plaintiff. However, the actual assignment of the leases from the first to the second plaintiff never took place despite reminders by the defendant (the present landlord) to have the assignment registered. The second plaintiff occupied the premises, paying the rent and other service charges. It intended to relocate and appreciated that the break clause constituted a once and for all opportunity to get rid of liability under the leases which as a result of the recession and the 1990 rent review was higher than the open market rent (viz a current passing rent of £644,347 pa).
Two notices were addressed to the landlord by the second plaintiff for the operation of the break clause on June 24 1995 without the tenant being aware of any possible invalidity in the notices. The landlord was concerned to keep at least one tenant from the company’s group as long as possible in the premises. The tenant was concerned to stay on only as an interim measure. By the time that the defect in the assignment became apparent there was no time to remedy it in time to meet the June 24 deadline. The tenant paid the rent after that date but not the penalty rent although that was also subsequently tendered. The plaintiff sought a declaration that all the leases had determined on June 24 1995. By counterclaim the landlord claimed double rent pursuant to the Distress for Rent Act 1737 and double value pursuant to the Landlord and Tenant Act 1730.
Held Declaration for the plaintiff.
1. The break notices were valid even though given by the second plaintiff to the landlord whereas the first plaintiff was still the actual tenant: see Jones v Phipps (1868) LR 3 QB 567, and Peel Developments (South) Ltd v Siemens plc [1992] 2 EGLR 85.
2. The first plaintiff was a virtual shell with no staff and activities; it had ceased to trade and held such assets it had not made over to the second plaintiff on a bare trust for it. Therefore, the second plaintiff was the general agent of the first plaintiff.
3. Under the 1730 Act, the tenant was liable for double value if it “wilfully” held over after the end of the term, but there had been no such wilfulness in the present case.
4. Further, there was waiver of the demand for double rent under the 1737 Act by the landlord’s acceptance of the single rent.
Paul Morgan QC and Caroline Shea (instructed by Macfarlanes) appeared for the plaintiffs; Kirk Reynolds QC and Anthony Tanney (instructed by Rowe & Maw) appeared for the defendant.