‘We were on a break’… UK High Court rules that a lease break notice served over 4 years prior is valid

On the specific facts of this case the High Court has held that a break notice served four years in advance of the break date was valid. The defendant tenant attacked the validity of its predecessor’s notice, but Judge Hodge KC found that those criticisms raised no triable issue to resist the claimant landlord’s application for summary judgement. In those circumstances, the break notice was a notice to quit for the purposes of the Landlord and Tenant Act 1954 (“LTA”), and so the tenant was unable to serve a valid section 26 request for a new tenancy.

Background

The lease in question was entered into on 11 February 2008 for a term of 21 years and made between Property Alliance Group Limited and its tenant, B&Q Plc. The lease provided for a tenant’s break option to determine the lease on 11 February 2023 by giving the landlord ‘not less than 6 calendar months’ prior notice’.

B&Q served a break notice on 10 December 2018, around 50 months prior to the break date.

CDS took an assignment of the lease from B&Q in November 2020. At the time of assignment, CDS had been made aware of the break notice.

The Dispute

In June 2022, CDS made a request for a new tenancy under section 26 of the LTA. The landlord claimed that the request was invalid because the tenant had served a valid break notice. The landlord issued proceedings seeking a declaration to this effect together with an application for summary judgement.

CDS in its response attacked the validity of the break notice on grounds that:

• the missing spaces before and after the ampersand in ‘B&Q Plc’ would leave a reasonable recipient in doubt about the party serving the notice;
• there was insufficient evidence demonstrating that the break notice had been served, as required by the lease, by special delivery;
• the landlord did not have evidence that the asset manager who served the notice did so with valid authority;
• the break notice may have been varied or withdrawn in the period between 2018 when it was served and 2020 when the assignment took place; and
• relying on a case in which an option to renew which was exercised over three years in advance was found to be invalid, service of a break notice four years and two months before the purported break date was too long in advance.

CDS also argued in the alternative that if the break notice was valid, this did not invalidate the section 26 request for a new tenancy. Its reasoning was that the LTA only precluded a tenant from serving a request where ‘the tenant’ has already given a break notice, and where B&Q was ‘the tenant’ who served the break notice, CDS could not be ‘the tenant’ who had served the notice for the purpose of section 26(4).

Judgment

Cutting through CDS’ arguments, Judge Hodge KC found that there were no triable issues upon which CDS could resist the application – the break notice was valid. The judge was satisfied that:

• a reasonable person receiving the notice would know it was served by the tenant under the lease;
• there was no evidence that the break notice had not been served by special delivery;
• the landlord did have evidence that the asset manager had authority to serve notice by virtue of their appointment;
• there was no evidence the break notice had been varied or withdrawn by agreement;
• an option to break a lease could be distinguished from an option to renew – parties benefitted from clarity in advance in the case of the former, and there was no reason to imply an upper limit to the notice clause.

As to CDS’ argument that it was not ‘the tenant’ that served the break notice, so it was free to make a request for a new tenancy, the judge rejected this interpretation of the LTA; section 26(4) does not prevent a tenant making a request for a new tenancy only if ‘that’ tenant has already given notice to quit so that a notice served will bind successors in title.

CMS Comment

This case demonstrates an unwillingness by the court to ‘nit-pick’ when it comes to technical imperfections in a break notice, particularly without any evidence in support. This may give some comfort to those serving notices, or relying on them.

Accordingly, while care needs to be taken when drafting, and serving, a break notice, the court may cut through fanciful arguments regarding their validity provided the notice was clear that its purpose was to determine the lease it was served under.

Whilst potentially specific to the wording of the lease as the break clause did not specify a maximum time limit for giving notice the Court held there was no reason to imply one as it was clear to the parties what the intention of the notice was.  This is therefore one to keep in mind when drafting such clauses.

It is also worth keeping in mind that break clauses are often conditional on compliance with various pre-conditions so that satisfaction of those is a requirement for valid termination not just correct preparation and service of the notice itself.

With regard to procedural issues, respondents to summary judgement applications can expect that the court will examine the evidence, and despite the need to avoid conducting a mini-trial, the court can reach a decision on the evidence before it as to what the facts are – Micawberism will not assist a respondent.

Article co-authored by Annie Fuller, Trainee Solicitor at CMS.