A typical break clause will require a party that wants to terminate a lease to serve notice of its intention to do so. The time limits prescribed by the lease must be strictly observed. However, compliance with any requirements regarding the service of notices is equally important. Parties should therefore check their leases and decide whether provisions governing the service of notices are permissive (because they set out how service may be effected) or prescriptive (requiring service to be effected in a particular way). If the provisions are prescriptive and are not followed, a notice will not have been properly served.
MW Trustees Ltd v Telular Corporation [2011] EWHC 104 (Ch); [2011] PLSCS 46 concerned a break notice that was served in good time, using a method of service prescribed by the lease, but was wrongly addressed to a previous landlord. On being reminded of the change of landlord, the tenant e-mailed a copy of the notice to a representative of the new landlord, who forwarded it to the managing agent. The agent e-mailed the tenant saying: “We accept the attached letter and can confirm we are happy for you to break the lease.” However, it also asked the tenant to serve a new notice on the new landlord at another address.
The case turned on the effect of the e-mail because the tenant failed to comply with the agent’s request. The landlord argued that the break notice was ineffective because: (i) the lease prescribed mandatory methods of service; and (ii) the notice was incorrectly addressed and had been forwarded by e-mail (which was not a method of service prescribed by the lease). It also claimed that its agent’s e-mail could not be construed as an acceptance of the validity of the tenant’s break notice. The judge disagreed. He ruled that the landlord was estopped from challenging the notice or had waived the requirements in the lease.
Interestingly, he indicated that he would have been prepared to uphold the tenant’s notice even though it was addressed to the previous landlord. He accepted that the notice had to be served on the correct landlord – but said that the lease did not specify that the landlord must be correctly described in the notice. Applying Mannai Investment Co Ltd v Eagle Star Insurance Life Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138, a reasonable recipient would not have been misled and would have realised that the tenant wanted to terminate the lease, even though its notice was addressed to the wrong party.
Some may feel that the tenant has had a lucky escape. Others will feel that the decision marks a victory for commercial common sense in the battle between landlords and tenants over break rights in leases. However, each case will be decided on its own particular facts. Consequently, tenants should continue to take the utmost care when preparing and serving break notice and would be well advised to remember that landlords are not obliged advise when notices are defective and can avoid acceptance of any defects by acknowledging receipt of the tenant’s notice and saying nothing more.
Allyson Colby is a property law consultant
