In times of economic uncertainty tenants are more commonly negotiating break options within their leases and some tenants are also seeking to exercise those break options given the continuing difficulties with the economic climate.
A recent case reiterates that the tenant must carefully consider the lease to ensure that a break notice is correctly served so as to be effective.
The usual position is that a tenant negotiates a right to bring the lease to an end on a specified date, subject to giving a specified period of notice. The lease will set out how that notice must be served and there are various ways in which a tenant can be caught by not serving that notice correctly. For example, a lease gives a tenant (T) the ability to terminate a Lease on 1 January 2012 subject to giving the landlord (L) at least six months prior written notice. T would, therefore, need to serve that written notice by 30 June 2011 for it to be effective. However, it would be usual for the lease to provide that the notice must be served by recorded delivery with service deemed two days after posting. In those circumstances a notice posted by T on 30 June 2011 would not be effective. Leases often prohibit service of notices by fax or email. The tenant should also be cautious about clauses within the Lease which prohibit the service of the notice where there is unpaid rent outstanding or where there are other breaches of the Lease.
In the recent case of MW Trustees Limited v Telular Corporation  a lease provided that a tenant had to terminate the Lease by giving six months written notice by hand or special delivery to the landlord. The tenant served an invalid break notice as it was addressed and sent to a former landlord but the tenant subsequently emailed the new landlord attaching a copy of the original notice.
The tenant accepted that the written notice was invalid since it was served on the wrong party and that the email did not constitute a valid notice in accordance with the lease. However, it argued that the email had been acknowledged by the landlord’s managing agent. Applying the leading decision of Mani Investment Co Limited v Eagle Star Life Assurance Company Limited  the Court found that a reasonable recipient would not have been misled as to the tenant’s intention to terminate the lease and that as the managing agent had accepted the break notice on the landlord’s behalf, the landlord was estopped from challenging the validity of service of the notice.
Although the case gives some comfort to tenants who fail to follow the requirements strictly, it highlights tenants serving break notices should take care to observe the lease requirements. For landlords it is a lesson in being careful how to respond, if at all, to an invalid break notice or risk inadvertently waiving the ability to challenge the validity of the notice.
If you would like to discuss this further, please feel free to contact Steve Farnham, commercial solicitor, on 01935 846749.