Landlords beware – if you hold property in the name of a partnership which consists of more than four individuals, and you serve a break notice on your tenants in the partnership name, it may not be valid.
In this case the High Court had to consider an application from the landlord seeking a declaration that a break notice served on their tenant was valid. The Claimant landlord was a limited partnership created in April 2011 which originally consisted of two partners, but with three additional partners joining shortly thereafter in June 2011.
In October 2011 the City of London Corp granted a 10 year lease to the Defendant tenant of premises in Fenchurch Street, London. The lease contained a break clause which allowed the landlord a right to terminate the lease on 27th September 2016 on giving at least 6 months' notice.
On 22nd March 2016 the Claimant landlord (comprising the five partners) took an overriding lease of premises from the City of London Corp. On the same day, the solicitors for the Claimant landlord wrote to the tenant informing them that the Claimant (defined in the letter as "the Partnership") had become their landlord and promptly served a break notice (together with a s.25 notice pursuant to LTA 1954) on the tenant. The tenant argued that the notices were invalid as the party giving the notice was not the landlord under the lease as the legal estate in land could not be vested in the name of a partnership as a legal estate could only be held by a legal person or persons, and a limited partnership had no legal personality.
The Claimant landlord's claim was dismissed and it was held that the notice was invalid as the legal estate in land could not be vested in the name of a partnership.
Limited Partnerships Act 1907
Statute provides that land held by a partnership could be vested in no more than four partners, and that where more than four persons were named as trustees or grantees, "the first four named" should hold the estate as joint tenants in trust. In this case, the "first four named" persons could not be established by reference to documents such as those filed in accordance with the provisions of the Limited Partnerships Act 1907. The overriding lease could not have been granted to the Claimant landlord, as that was not possible in law, and it was not granted to four of the partners individually. The break notice referred to the Claimant partnership being the landlord under the lease which was not correct and the Claimant partnership was not, therefore, in a position serve the break notice on the tenant.
Landlords should be aware that if they are taking a lease of premises in the name of a partnership, issues will arise if the partnership comprises more than four partners. Tenants should also be aware of this fact and should keep this in mind if they receive a break notice from their landlord in the name of a partnership. It is always worth checking the number of members comprising the partnership, particularly if you are a landlord wanting to serve a valid break notice, or a tenant who wants to challenge the validity of a break notice.