Option to break tenancy – Tenant serving notice to break – Invalid notice – Tenant thereafter making payment of rent and handing over keys – Whether landlord having elected to treat lease at an end – Whether agent of landlord having sufficient knowledge of facts and legal rights to make election
The plaintiff landlord granted an underlease of County House, Bristol, to the Secretary of State for the Environment, the tenant, for a term of 25 years less three days from March 25 1982 at an initial rent of £92,037 subject to review. Clause 5.9 of the lease stated: “if the tenant shall be desirous of determining this lease on 25 December 1995 (the tenant shall) serve on the landlord not less than six months notice in writing”. The landlord entrusted management of County House to Y. Management on behalf of the tenant was carried out by C. On June 22 1995, the tenant’s solicitors wrote to the landlord stating the tenant wished to exercise the break clause. An arrangement was reached that any question of dilapidations would be settled, after possession had been given, by a cash payment. One of the conditions of the option to break the tenancy was that the tenant would pay the landlord “a sum equal to half of the annual rent payable as at the date of such notice, such sum to be paid not later than 18 December 1995”. One-half of the passing rent was £100,000.
In November 1995 Y received a computer printout indicating that rent of £50,000 would fall due on Christmas Day 1995. Y realised that this was wrong and wrote on the printout “Stop. This lease terminated on 24 December 1995. However, look out for an ad hoc payment of £100,000 in December”. December 18 came and went and no payment of £100,000 was made by the tenant in accordance with the break clause. Neither side realised immediately that the payment had not been made. On December 20 a meeting took place between Y and C to arrange handing over the keys. On December 21 Y’s attention was drawn to a remittance advice stating that £50,000 was to come into the bank account in respect of rent paid on usual quarter days. Y realised that something had gone wrong because what should have been paid pursuant to the exercise of the break clause was six-months’ rent, £100,000. Y made several telephone calls, one of which was to the tenant’s solicitors asking whether there were grounds for disputing the validity of the break clause served by the tenant. On Christmas Day the keys were handed over.
After Christmas it was decided, on behalf of the landlord, to take the point that the break option condition had not been satisfied and that the notice was invalid. The tenant’s solicitors replied drawing attention to the meeting of December 20 and the handover of the keys on Christmas Day and contended that the landlord had waived its right to insist on strict performance. The landlord’s solicitors sought a declaration that the lease was still subsisting and not terminated by the notice dated June 22 1995 or otherwise. The judge held that there had been no waiver by election of the right to insist on strict performance and granted the declaration sought. The tenant appealed.
Held The appeal was dismissed.
A person was not to be held to have elected unless he knew that he had a right to choose between two alternative courses of action and sufficient knowledge of the legal right to choose. The knowledge required for making an irrevocable choice was full knowledge and, in the instant case, full knowledge had not, on the facts, been demonstrated: see per Stephenson LJ in Peyman v Lanjani [1985] Ch 457 at p487.
Kirk Reynolds QC (instructed by Veale Wasbrough, of Bristol) appeared for the appellant; Kim Lewison QC and Caroline Shea (instructed by Lyons Davidson, of Bristol) appeared for the respondent.
