Landlord and tenant – Termination of lease – Notice – Respondent tenant purporting to terminate lease by fax – Notice becoming valid retrospectively when acknowledged by appellant landlord – Whether break clause notice valid and effective – Appeal allowed
The appellant was the owner of commercial premises that were let to AVT Ltd under a lease for a term of 15 years from 31 January 2001. In 2004, the lease was assigned to the respondent. It contained a break clause under which the respondent could terminate the lease at the end of the fifth or 10th year of the term by giving six months’ notice.
The respondent sought to terminate the lease in July 2005 when in rent review negotiations with the appellant. It sent notices both by letter and fax on each of 29 and 30 July 2005. The process server delivered the letters to the wrong address and they were therefore ineffective. The faxes, which arrived when the appellant’s offices were closed, retrospectively became effective notices when their receipt was acknowledged in writing in a letter dated 8 December 2006 and again in the appellant’s witness statements for trial, dated 15 November 2007. As a result, the notices did not become effective until 8 December 2006 at the earliest, which was more than 15 months after the last day for serving a six-month notice to break the lease and more than 10 months after the fifth anniversary break date. However, the respondent vacated the premises by the break date and returned the keys.
An issue arose as to whether the break clause notice under the lease was effective. The respondent argued that the notice was valid and was effective in bringing the lease to an end at its fifth anniversary on 30 January 2006. The appellant claimed that the notice was ineffective and it was therefore entitled to claim further rent. The judge decided the issue in favour of the respondent. The appellant appealed.
Held: The appeal was allowed.
The language of the break clause was clear. The acknowledgement was not evidentiary only, but part of the essential validity of the notice. Where the timing of a notice was part and parcel of its essence, it would be nonsensical for it to be deemed effective after the relevant acknowledgement date. In such circumstances, the acknowledgement was not merely retrospective in the benign sense that it was after the event of the notice, but could be retrospective, as in the instant case, in that a notice that, before the acknowledgement, was ineffective to entitle the tenant to break the lease at the fifth year break point, subsequently and after the beginning of the six-month notice period became an effective notice: Yates Building Co Ltd v RJ Pulleyn & Sons (York) Ltd [1976] 1 EGLR 157; (1975) 237 EG 183 considered.
On the proper construction of the lease, an informal notice, if made and acknowledged in time and in writing, would be a valid break clause notice; it would otherwise be ineffective unless the landlord subsequently acknowledged the notice as valid. If it was ineffective six months before the lease anniversary in question, it could not be made effective within the six-month notice period. It was irrelevant that the landlord was not obliged to acknowledge an informal notice. The tenant retained the ability to serve a formal notice until it was too late to do so. However, the landlord could act in a business-like manner and acknowledge an informal notice that was served in time in the realisation that, unless it did so, its tenant had the option of serving a formal notice. If, however, the tenant served an unacknowledged informal notice and no formal notice, or it ran out of time to serve a formal notice, it would be at fault, assuming he had not been misled by the landlord.
David Taylor (instructed by HBJ Gately Wareing, of Birmingham) appeared for the appellant; Nicholas Dowding QC and Katherine Holland (instructed by Denton Wilde Sapte LLP) appeared for the respondent.
Eileen O’Grady, barrister
