Lease containing landlord-only break clause – Proviso in lease requiring break notice to be service at tenant’s registered office – Whether service of notice at place other than registered office sufficient – Judge finding notice not validly served
The claimant tenant occupied the ground-floor shop and basement of 169 Kensington High Street, London W8 (the premises). The defendant was the owner of the reversion expectant on the termination of the tenant’s lease. The lease was for a term of 10 years commencing on 14 March 1998 and ending on 13 March 2008. By clause 9 of the lease, the landlord was given an option to determine the lease on 24 December 2000, on the payment of £50,000 and providing the defendant gave the tenant not less than six months’ prior written notice. Any such notice had therefore to be given by 24 June 2000. Clause 5.3 of the lease provided: “Any notice served… shall comply with the provisions of section 196… Provided Always That where the Tenant is a company any notices required to be served on it shall be sent to its registered office” (the proviso). The tenant was a limited company.
Clause 8 provided that the provisions in sections 24 to 28 of the Landlord and Tenant Act 1954 be excluded. As a result, the effect of a valid exercise of the option would determine not only the contractual tenancy but also any continuing right of occupation on the part of the tenant after 24 December 2000. On 21 June 2000 the defendant’s solicitor served the necessary break notice on the tenant at the premises and for the purposes of the hearing it was assumed that no notice was sent to the company’s registered office. The issue arose of whether the defendant had validly served notice to determine the lease with effect from 24 December 2000.
The tenant contended that sending the notice to the premises was not sufficient. It relied upon the Scottish case of Capital Land Holdings Ltd v Secretary of State for the Environment 1996 SLT 1379, where it was held that, where a lease contained a condition requiring notice to be sent to the tenant company’s registered office, the giving of actual notice to a tenant at his place of business was not a valid substitute. The defendant contended that the clause did not require strict compliance to ensure the validity of the notice, rather the general test for the validity of a notice exercising an option was whether the reasonably recipient of the option notice would have realised what it was intended to do. The defendant relied upon Yates Building Co Ltd v RJ Pulleyn & Sons (York) Ltd [1976] 1 EGLR 157, which held that where an option clause prescribed a mode of service, a different mode of service was equally efficacious provided that it was no less advantageous to the recipient.
Held: The notice was invalid.
1. The proviso had to be read in conjunction with section 196 of the Act as a whole and in that context its object was clear, namely to prescribe the place for service. It required that notices be sent to the company’s registered office rather than being left at or sent to its place of business, or affixed to or left at any building comprised in the lease. The proviso was mandatory and not permissive in its effect, therefore there had to be strict compliance as to the place of service.
2. The principle in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57, concerning errors in the contents of notices did not apply so as to render immaterial the compliance with conditions that were external to the content of the notice itself, such as time or place for service.
3. Although exceptional, the courts have held that even though expressed in a language that appeared to be mandatory, a provision as to the method of service could be treated as being permissive where, for example, the method of service adopted could be shown as being no less advantageous to the offeror. However, that category did not apply to the instant case which was not concerned with the mode of service as in Yates, but with the place of service. Therefore the notice that had been served contrary to the place prescribed by the proviso did not bind the tenant.
Jonathan Seitler (instructed by DLA, of Birmingham) appeared for the claimant; Kim Lewison QC (instructed by Nabarro Nathanson) appeared for the defendant.
Thomas Elliott, barrister
