Levett – Dunn and others v NHS Property Service Ltd [2016] EWCH 943 (CH)

Summary

The High Court has held that notices were correctly served on landlords when they were sent to the landlords’ address, as recorded on the leases. This was despite the fact that the leases required the notices to be served on the landlords’ “last known abode or place of business” and that they no longer had a business connection with the address. In addition, it was held that re-letting a property will be considered an unequivocal act of acceptance of the termination of a lease.

The facts

Three identical leases of Coniston House at Chapel Ash (the “Property”) were let by four joint landlords (three individuals and one limited company) who were, at the time, the trustees of a retirement benefit scheme. Wolverhampton City Primary Care Trust (the “Tenant”) served break notices on each of the named landlords, in time, to the address listed in the leases. However, the landlords denied that they had been properly served and sought declarations to that effect.

Issue 1 – Service

The leases stipulated that a notice would be deemed served if left at the “last known place of abode or business… of the lessor” as per s.196 of the Law of Property Act 1925. However, the claimant landlords argued that the Property was no longer the place of abode or business of any of the landlords as:

  • one of the landlords did not have any connection with the business at the Property any more;
  • one had not been to the Property for 14 years; and
  • another had never conducted any actual operations of its own at the Property.

At the date of the leases, only one of the four landlords, Simon Levett-Dunn, had an active business connection with the Property, but only in the sense of business activities carried on behalf of his company. Additionally Simon Levett-Dunn had ceased to be a trustee of the retirement benefit scheme and had since transferred his interest to the other landlords, who therefore argued that the notice served on him did not bind “the landlord”.

Issue 2 – Surrender

The Tenant argued that the landlords had treated the leases as surrendered for three reasons. The first was because the director of the Property’s management company had stated that the landlords would be responsible for the utility bills after the date on which the Tenant claimed that the leases had terminated. The second was because the landlords had marketed the Property with a view to re-letting it and thirdly, because they had in fact re-let it to a new party, for a term of two years.

The decision

Service:

The judge held that the principal purpose of a service provision in a lease is to set out a practicable method by which a party serving a notice can be reasonably sure of how he should serve notices. He stated that, having recorded their address as that of the Property, the landlords “must have been content that any correspondence sent to that address would find its way to them”. Equally, he held that if a landlord did not choose to inform the other of its change of address, then it is not unreasonable that any risk that the documents do not in fact reach him, falls on him.

Furthermore, it could not be argued that the address might not be considered a “place of abode or business” if looked at separately from the contract, nor was it arguable that the landlord in fact carried out little or no business there. On this basis, the judge declared that the Tenant had effectively served the notices.

Surrender:

Additionally, the judge found that the director’s email, referring to the responsibility of the landlords to pay the utility bills, was to be read in the context of her previous emails, which had maintained that the leases were continuing. For instance, she had very carefully worded an email in which she stated that the landlords accepted the keys, on a without prejudice basis and only for practical and security reasons, for the benefit of all concerned. The judge found that it would be “reading too much into that email to regard it as a fundamental change of position”.

The judge commented that the marketing of the Property for a new tenant alone was not sufficient to amount to an unequivocal act of accepting that the leases had ended. The landlords, he held, were merely mitigating their losses and could have withdrawn from the marketing at any point and relied on their contention that the leases with the Tenant were continuing. However, he found that the granting of a new lease showed that the landlords had taken back possession of the Property. In fact, during the negotiations of the re-letting, the landlords’ solicitors had given the prospective new tenant’s solicitors assurances that the leases with the original Tenant had come to an end. This was held to be an unequivocal act of acceptance that the original leases had ended.

Finally, the judge agreed with the Tenant’s submission that payments made after the Tenant argued that the leases had ended were ones made in mistake and were not payments of rent made in instances where the Tenant was treating the leases as continuing.

Significance

  • If a landlord records his address on a lease, it is to be taken as the acceptable place of abode or business at which notices can be served pursuant to s.196 of the Law of Property Act 1925, unless the landlord alerts you otherwise.
  • Accepting keys on a without prejudice basis, merely for practical reasons, will not be considered an act of treating leases as terminated.
  • Context is key when deciding on whether property agents’ words can be taken to imply that the landlord considers the leases terminated.
  • Marketing a property for re-letting is merely an act of mitigation of loss, and is not the same as treating the first leases as terminated, because a landlord can end the marketing at any time.
  • Conversely, re-letting a property is an unequivocal act, which signifies that a landlord considers that the original leases have ended.