Termination of lease — Break clause — Failure to notify tenant of change of landlord — Tenant notifying wrong company of intention to exercise break option — Whether break clause validly exercised — Whether landlord barred from denying validity of notice — Declaration granted
The defendant tenant’s lease contained a break clause that entitled it to terminate on one year’s notice. The clause contained a number of conditions or requirements: in particular, in order to terminate the lease on 2 February 2006, the tenant had to give a written notice to the claimant landlord prior to 2 February 2005. Notice could be given by various means, including by way of first-class recorded delivery post to the registered office of the recipient.
In 2001, a company (B) was established as a joint venture to invest funds in commercial properties, either by acquiring properties directly or through subsidiaries. One such subsidiary was the claimant, which acquired the premises in issue on 14 October 2002. The claimant subsequently changed its name but the defendant was not informed and invoices were sent in respect of rent by managers stated to be “acting as agents for B”.
The defendant’s solicitor served a notice of intention to terminate addressed to B. The notice reached the claimant within the time limit. However, the claimant argued that the notice was invalid since it had not been served on the claimant as landlord, which was an essential condition of the operation of the break clause. It applied to the court for a declaration that: (i) the defendant had not validly terminated the lease; (ii) the letter sent by the solicitor, as agent for the defendant to B was not a valid notice under the terms of the break clause and; (iii) the lease continued in full force and effect.
Held: The declaration was granted.
The break notice had not been validly served according to the terms of the lease and the absence of confusion or prejudice on the part of the claimant irrelevant. It was not for the court to rewrite the contract.
Although the notice had reached the claimant so that it would have been aware that the defendant was trying to give notice, it would be wrong to treat the defendant’s mistake as to the identity of the landlord as a mere technicality. That approach would be inconsistent with the condition in the lease. Where the exercise of an option was made subject to conditions, they were generally construed as conditions precedent that had to be strictly complied with if the option was to be validly exercised: United Scientific Holdings Ltd v Burnley Borough Council [1977] 2 EGLR 61; (1977) 243 EG 43 and 127 and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 considered.
Only full compliance with the terms of a contractual break clause could effect the break. Nothing in the lease relaxed the condition that notice had to be given by the tenant to the landlord and a tenant could not be said to have given effective notice by sending to the landlord’s registered office a notice addressed to a third party. Moreover, it was insufficient that such notice had reached an individual who was the “directing mind” of the landlord company: Mannai distinguished; Capital Land Holdings Ltd v Secretary of State for the Environment 1996 SC 109 considered.
Furthermore, the claimant was not barred from disputing the effectiveness of the notice. In the instant case, no reasonable person in the defendant’s position would have been induced to rely upon the invoices or other communications, representing B as landlord, in deciding upon whom notice should be served.
Craig Connal QC, solicitor advocate, and Mark Easton, solicitor (instructed by McGrigors, of Glasgow) appeared for the claimant; Mark Martin QC, dean of the faculty, and Rhoderick McIlvride (instructed by Anderson Fyfe, of Glasgow) appeared for the defendant.
Eileen O’Grady, barrister
