Break notices - a Scottish and English perspective

Summary
A recent decision of the Scottish courts in Tyco Fire & Integrated Solutions (UK) Limited v Regent Quay Development Company Limited [2016] suggests that in Scotland at least, a clerical error alone in including only part of the demised premises, will not be sufficient to render a break notice invalid if the intention of the notice is unambiguous and clear.

Whilst the same test is adopted by both the English and Scottish courts, namely whether the notice is sufficiently clear and unambiguous so that the “reasonable person would not have been perplexed by the error”, the English courts appear to apply a higher threshold to that test maintaining the importance of accuracy to ensure validity of a break notice.

Other recent English court decisions also provide clarification on service and pre-condition requirements and are a useful reminder of the careful consideration required to exercise an option to determine successfully.

Recent decisions of the English courts

a. Form of notices

Despite the decision of the High Court in Siemens Hearing Instruments Ltd v Friends Life Ltd [2013] that there was no inflexible rule that break option requirements must be strictly complied with, the well-established principle of such clauses necessitating strict compliance was restored on appeal. The Court of Appeal held that for the exercise of an option to be valid, it must satisfy both the formal and substantive provisions of the clause. As the clause stated that the notice “must be expressed” to be given under the Landlord and Tenant Act 1954 S. 24(2) and it did not do so, the notice was invalid. The court commented that there was no room for the notion of substantial compliance.

In Vanquish Properties (UK) Ltd Partnership v Brook Street (UK) Ltd [2016], the court considered the validity of a notice purported to be given by the Lessors (who were named as such in the lease) but given in the name of the incorrect entity (this being a partnership incapable of holding the estate at law). The court held that the reasonable recipient would have been left in doubt about what was intended and held that the notice was therefore ineffective.

b. Service

It has recently been held that a break notice, which was served on the landlords at an address specified in the lease, was served effectively despite the fact that three of the four landlords had since changed address and the lease required that the notice was to be served at the landlords’ last known place of abode or business (Levett-Dunn v NHS Property Services Ltd [2016]).

The court held that it was within the landlords’ power to inform the tenant of the new address and by failing to do so they assumed the risk of documents not reaching them. This case serves as a reminder to landlords to notify tenants of any change of address and, notwithstanding that this decision is favourable to the tenant, the tenant is well advised to seek to comply with break provisions to avoid any such uncertainty.

c. Pre-conditions

Vacant possession as a pre-condition to the valid exercise of a break right has always been a cause of concern for tenants. A recent case emphasises the importance of identification of chattels, and specifically that partitioning in that case which was considered a chattel and failure to remove the same meant that the pre-condition of vacant possession was not satisfied.

Comment

If the Scottish courts can be said to have adopted a more lenient approach to the enforceability of break notices, the English courts have not followed suit. The recent cases all serve as a reminder of the importance of careful analysis of, and strict compliance with, break provisions.

This article was co-authored by Laura Hitchcock, trainee solicitor.