The recent case of Vanquish Properties (UK) Ltd v Brook Street (UK) Ltd provides a useful reminder that a limited partnership (“LP”) has no legal personality and that property cannot, therefore, be held in the name of an LP.
What is a limited partnership?
An LP is similar to an ordinary partnership except that it must be registered at Companies House and has two categories of partner: general partners, with responsibility for managing the business and with unlimited liability for the firm’s debts and obligations; and limited partners, who invest capital but do not take an active role and whose liability is limited to the capital they have contributed.
Like an ordinary partnership an LP is not a legal entity – it is simply a collection of individuals or companies carrying on a business together.
How can a limited partnership hold property?
As an LP is not a legal entity, it cannot hold a legal estate in land in the name of the LP. The legal owners of the LP’s property may be all of the individual partners; however, the legal estate cannot be vested in more than four persons so an LP’s property will usually be held on trust by one or more nominees (often the general partners).
It is essential that LPs get this right when buying property or taking a lease; if an LP attempts to take a legal estate in land in the name of the LP the estate will not be validly transferred/created.
The decision in Vanquish Properties (UK) Ltd v Brook Street (UK) Ltd
The LP in this case was Vanquish Properties (UK) Ltd Partnership (“VPLP”). It was made up of one general partner and four limited partners.
The tenant, B, had a lease which contained a break clause exercisable by the landlord (or its successors in title) on 27 September 2016, by giving not less than six months’ notice. On 22 March 2016 the landlord granted an overriding lease to VPLP, acting by its general partner. On the same day VPLP gave B notice that it had become its direct landlord and served a break notice as landlord under the lease, notifying B that the lease would determine on 27 September.
B argued that the break notice was invalid because it was given by a party who was not its landlord under the lease. The High Court agreed, concluding that the lease could not have been granted to VPLP as this is not possible in law. As such VPLP was not B’s landlord and could not validly serve the break notice.
This case serves as a reminder of the need to ensure that the correct party is named in a lease or other property document. In this case the lease should have been granted to the general partner and up to three of the limited partners, on trust for all of the partners. The break could then have been exercised in the same name(s) and would have been valid. Alternatively, a commonly used structure is the appointment of two nominee companies to hold the property on trust for the LP.
Always take legal advice if you are in any doubt as to which party should be named in any kind of document or notice.