The Court of Appeal has allowed the landlord’s appeal in the case of Friends Life Limited v Siemens Hearing Instruments Limited [2014] EWCA Civ 382.  The outcome reaffirms previous case law requiring strict compliance with conditions when exercising a break right to ensure the break notice is effective.

In this case, the tenant had a right to break its lease on 23 August 2013.  The break clause specified that the break notice “must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954”.  This drafting would have been included in the lease due to a specific concern in 1997, when the agreement for lease was entered into, that a tenant might be able to achieve a downwards rent review by serving a statutory notice requesting a new tenancy under the 1954 Act in the alternative to a contractual notice to quit.  Case law since has confirmed that this is not possible but, at the time, the drafting would have been included to prevent the tenant from using the break clause to request a new tenancy.

The break notice served by the tenant did not include the prescribed “magic words” and the landlord claimed that it was invalid.  At first instance the judge held that failure to include the words made no difference since they were now pointless and the tenant’s break notice was valid; the landlord appealed.

The Court of Appeal found the principles applicable to compliance with conditions on which an option depends apply equally to conditions to the exercise of a break clause.  The often quoted example from Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] was given that “If the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate the lease.”  In this case the Court found that the word “must” was not permissive and therefore the consequence of a failure to comply with the formal requirement was that the break notice was ineffective. 

The case is a warning to tenants that they should adhere strictly to conditions attached to the exercise of a break right even if the original reasons for them have become irrelevant.