Articles

Tenants must be particularly diligent when exercising their option to break a lease. Far too commonly, disputes arise where a landlord challenges the validity of a tenant’s notice to break due to the way it has been served. The outcome of such a dispute could prove particularly damaging to a tenant company whose financial plans could be hit by the liability of additional rent payable to the next break date or the expiry of the lease.

This issue was tested most recently in the Court of Appeal case of Orchard (Developments) Holding Plc v Reuters Limited (2009).

Reuters had succeeded in establishing, in the court below, that a notice they had served on their landlord, Orchard, to break a tenancy at the end of the fifth year of a fifteen year lease was effective. Orchard then appealed.

The lease stated that Reuters had to give no less than six months notice of their intention to break the lease prior to the break date. Reuters therefore sent notices by post and by fax on consecutive days shortly before the six month notice period expired. Unfortunately the person who served the letters of notice on behalf of Reuters posted them into the wrong letterbox and were therefore deemed invalid. However, due to an unusual break clause in the lease, informal service of notice by fax would have been deemed valid if the landlord had acknowledged receipt of the notice. The landlord did not acknowledge receipt of the faxed notices until the matter was taken to court.

The Court of Appeal therefore overturned the previous decision and found that the notice had not been validly served. Reuters were therefore left to pay a further five years rent until the next break date arose.

This case highlights how important it is for a tenant to have a thorough understanding of the terms of their lease before a break date. Tenants must ensure they are aware of;

- The method of service required under the terms of their lease.
- Who the landlord is and their address for service.
- Whether the break is conditional on any matter.

This information should be understood well in advance of the break date. This will allow time for any conditions stipulated in the lease to be complied with, notices won’t be filed in a rush and receipt from the landlord can be obtained. Preparation is key.

Ben McFeely