It is well known that partnerships do not have separate legal personality and that they cannot buy or lease premises in their own name. The partners themselves must be parties to the instrument – and, if there are more than four of them, section 34(2) of the Law of Property Act 1925 provides that the four first individuals named in the document will hold the land as joint tenants in trust for the partnership.
Vanquish Properties (UK) Ltd Partnership v Brook Street (UK) Ltd [2016] EWHC 1508 (Ch) raised an interesting question about the validity of a break notice served by a limited partnership. Limited partnerships are governed by the Limited Partnership Act 1907 – and are not to be confused with limited liability partnerships, which are, in law, separate persons.
Limited partnerships must have one or more “limited partners” and at least one “general partner”. A limited partner is very much like a shareholder in a limited company; neither risks more than the value of their investment. “General partners” are responsible for the day-to-day management and control of the partnership’s business; they usually hold property as trustees for the partners and are liable for the partnership’s debts.
Following the grant of an overriding lease, the incoming landlord served a break notice on its tenant pursuant to a clause in the occupational lease. The overriding lease had been granted to “Vanquish Properties (UK) Limited Partnership acting by its general partner Vanquish Properties GP Limited” and the break notice was served in the name of the limited partnership. The landlord tried to persuade the court that this was in order, but the judge ruled that it had not been legally possible to vest the overriding lease in the limited partnership. Therefore, the break notice was incorrect.
The partnership had had five partners when the overriding lease was granted and the judge found it impossible to say which of them were intended to hold the legal estate. But the overriding lease did state that the limited partnership was acting by its general partner and the judge was prepared to assume that the lease had vested in that company. However, the general partner was not named as the landlord in the break notice. Consequently, the notice was invalid unless it could be saved by applying Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
Would it have been clear to a reasonable recipient that the reference in the notice to the limited partnership should have been a reference to the general partner? The judge thought not. The notice was served without any prior warning and the tenant knew nothing about the grant of the overriding lease. The threshold for satisfying Mannai is high and a reasonable recipient, knowing that the legal estate had not vested in the limited partnership, might well have been puzzled.
There was more than one possibility and a reasonable recipient might have been unsure about what was intended, or might have concluded that the notice was served by some – but not all – of the partners. Consequently, it was not clear that the reference to the limited partnership in the notice should have been a reference to the general partner. Therefore, the notice was invalid.
Allyson Colby is a property law consultant
