Allyson Colby looks at a case involving a break notice that was ruled ineffective owing to a problem with identity
Key points
- A break notice named the wrong entity as the landlord.
- 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 potential landowners.
- As a result, the notice was ineffective.
When serving notices it is essential to have a good grasp of property law and to understand the entities being dealt with. Technicalities matter. Pity the poor sender who gets something wrong and finds itself stuck with a lease as a result.
Vanquish Properties (UK) Ltd Partnership v Brook Street (UK) Ltd [2016] EWHC 1508 (Ch); [2016] PLSCS 182 illustrates this perfectly. It concerned a break notice served on behalf of a limited partnership, a vehicle sometimes used for property developments and investments. In order to decide whether the notice was valid the court had to go back to first principles, before considering the special rules that apply to limited partnerships and, finally, the effect of Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
Background
The case concerned a property in Fenchurch Street in the City of London. It formed part of a larger site that was to be the subject of a major redevelopment. The offices on the lower ground floor had been let for a term of 10 years commencing on 28 October 2011, but the freeholder had the right to break at the end of the fifth year of the term.
Shortly before the deadline for the exercise of the break right, the freeholder granted an overriding lease to “Vanquish Properties (UK) Limited Partnership acting by its general partner Vanquish Properties GP Limited”. The lease was for a term of six years and two months and, therefore, did not need to be registered at the Land Registry.
The incoming landlord contacted the tenant immediately. It informed the tenant of the change of ownership, required rent to be paid to the limited partnership and stated that it was exercising the break right in the lease. The break notice that it served was expressed to be given by “Vanquish Properties (UK) Limited Partnership” and was accompanied by a notice under section 25 of the Landlord and Tenant Act 1954, stating that the incoming landlord would oppose any renewal of the occupational lease on ground (f) (redevelopment). The parties agreed that the fate of the section 25 notice depended on the efficacy of the landlord’s break notice.
Partnerships
It is well known that partnerships do not have separate legal personality and cannot buy or lease premises in their own name. The partners themselves must be parties to any conveyance – and, if more than four are named in the instrument, the first four named individuals will hold the land on trust for the partnership: see sections 34(2) of the Law of Property Act 1925 and the Trustee Act 1925 respectively.
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 do not have legal personalities of their own and must have one or more limited partners, whose liability will be limited to the value of their investment, and one or more general partners to assume responsibility for day-to-day management of the partnership’s business and liability for its debts.
Overriding lease
Since limited partnerships are not entities in their own right, it was legally impossible for the overriding lease to have vested in the partnership. So who held the lease?
It might have been possible to construe the lease to the partnership as being a lease to all the partners, had there been no more than four of them. However, the limited partnership had five members – and section 34(2) of the Law of Property Act 1925 was of no assistance because none of the partners had been named as grantees of the overriding lease.
There was one further possibility, but this did not help the landlord either. The lease stated that the partnership was “acting by its general partner Vanquish Properties GP Limited”. However, the break notice had been served in the name of the limited partnership. So, if the lease had vested in the general partner, the break notice had wrongly identified the landlord.
Mannai
Break notices may be upheld, even though they wrongly identify break dates and, in some cases, despite mistaken identities, thanks to Mannai. As a result of that case, a mistake in a notice will not necessarily invalidate it if a reasonable recipient would have been left in no doubt about its meaning.
The limited partnership tried to persuade the judge that it was obvious that the break notice had been served on behalf of the general partner, but the judge disagreed. The general partner was not named in the break notice and there was nothing in the accompanying letter, the overriding lease, or in the documents filed at Companies House concerning the limited partnership that would have made things clear. Furthermore, the legal requirement that limited partnerships must have a general partner to deal with the day-to-day management of their business did not necessarily mean that the general partner must hold the lease for the partnership.
Therefore, a reasonable recipient might well have been puzzled. It could have concluded that the notice had been served by some, but not all, of the partners. The threshold for satisfying Mannai is high and, because a reasonable recipient might have been unsure about what was intended, both the landlord’s notices were invalid.
Allyson Colby is a property law consultant
