Break notices – its not what you say, but what you mean
Where a party to a lease is looking to serve a break clause so as to bring that lease to an early end, best advice is that they should carefully consider the wording of the break clause and any related clauses and ensure that they satisfy any conditions attached to the break clause to the letter. However, in the case of Siemens Hearing Instruments v Friends Life (judgment handed down on 12 July 2013) the High Court held that a break notice served by the tenant was valid even though it did not satisfy the express requirements of the break clause.
By a lease dated 27 January 1999, the parties entered into a 25 year lease relating to commercial premises in Crawley. The lease commenced on 24 August 1998 at an initial rent of £224,000 per annum (this had increased to £325,000 per annum at trial).
Clause 19 of the lease stated that the tenant could break the lease on 23 August 2013 by giving the Landlord not more than 12 month's and not less than 6 month's written notice. Clause 19 expressly stated that any break notice served "...must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954".
On or around 28th September 2012, the tenant's solicitor served what was intended to be a break notice on behalf of the tenant. In addition to identifying the tenant and the property in question, the notice went on to state:-
"We, X, HEREBY GIVE YOU NOTICE, for and on behalf of the Tenant, that the Tenant intends to terminate the Lease 23 August 2013 in accordance with clause 19 of the Lease so that the Lease will determine on that date"
The Landlord, highlighting that the reference to Section 24(2) of the 1954 Act was missing from the notice, asserted that the notice was not valid and as such, the lease would not end on 23 August 2013. The tenant argued that the notice was valid, asserting that the absence of what it contended were 'meaningless' words should not automatically render the break notice invalid.
Having given careful consideration to the lease, in particular to the break clause, Nicholas Strauss QC held that that the tenant's notice was not compliant with the break clause. Ordinarily, such a conclusion would be fatal for the validity of a break notice. However, on this occasion, it was held that the break notice was valid. Nicholas Strauss QC held that whilst conditions relating to when a notice must be served and steps that must be taken in advance of the termination date must be strictly adhered to, that was not the case regarding a requirement to use certain wording in a break notice.
It was noted that the lease was silent on the consequences of a non-compliant break notice. Nicholas Strauss QC stated that where a lease does not provide for the consequences of non-compliance with the requirements of a break notice "it is natural to conclude that it was intended that the notice should, at least in some circumstances, but not necessarily all, survive non-compliance."
Siemens Hearing Instruments v Friends Life should not be seen as a sign that the Court is relaxing its views upon break clauses. The tenant was lucky. Whilst the tenant was, on this occasion, able to break the lease, substantial expense was incurred by both parties in progressing this matter to trial. This would have been avoided had the tenant complied with the requirements of the break clause.
Break clauses remain a highly contentious issue and advice should be sought by any party looking to serve a break notice or who has received a break notice.
Rollits' Property Dispute Resolution Group has considerable experience in advising and assisting both Landlords and Tenants with regards break notices and all manner of contentious property related issues. Please contact Ralph Gilbert, partner and Head of the Property Dispute Resolution Group on 01482 323239 or email@example.com for further assistance.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.