We commented on the first instance decision in the case of Friends Life Limited v Siemens Hearing Instruments Limited.

The decision has now been successfully appealed and the case now re-affirms the principle that compliance with the pre-conditions of a Break Clause in a lease must be strict.  If there is not strict compliance the Break Notice will not determine the lease.

The facts of the case are considered below, however the important principle that arises is:

A lease will only be broken if the party with an option to Break satisfies the Break pre-conditions.  There is no halfway house: either the party with the option to break has satisfied the Break pre-conditions or not.  If they have not the Lease will not determine.

Facts

The facts of the case are provided in detail in our previous article.

In short the Tenant was granted a Lease for a term of 25 years from and including 24 August 1998.

Clause 19 of the Lease contained a Break Clause in the following terms:

  • "19.1     In this clause the Termination Date means 23 August 2013.
  • 19.2      Subject to the pre-conditions in clause 19.3 being satisfied on the Termination Date and subject to clause 19.4 the Tenant may determine the term on the Termination Date by giving the Landlord not more than 12 months and not less than 6 months' written notice, which notice must be expressed to be given under Section 24 (2) of the Landlord & Tenant Act 1954".

On 28 September 2012 the Tenant's solicitors wrote to the Landlord giving notice for and on behalf of the Tenant to terminate the Lease on 23 August 2013.

The Break Notice made no reference to Section 24 (2) of the Landlord & Tenant Act 1954 (the Act).

The Landlord successfully argued that the word of the word "must" in clause 19.2 created a mandatory pre-condition that was not satisfied as there was no reference to the Act in the Break Notice. Therefore the Break Notice could not be valid.

It was argued unsuccessfully for the Tenant that although the Break Notice did not make specific reference to Section 24 (2) of the Act, it was compliant with the substantive provisions of Section 24 (2) of the Act.  This argument was not accepted by the Court: the Break Clause was clear - the Break Notice must be expressed to be given under the Act.

The question for the Court in cases such as this is whether the Tenant has satisfied the Break pre-conditions; the answer can only be, yes, or no. If the answer is yes the break pre-conditions will be satisfied and the lease will determine. If the answer is no, the break pre-conditions will not be satisfied and the lease will not determine. It is not sufficient to partially comply with a break pre-condition.

A final comment

In the final paragraph of the Judgement Lord Justice Lewison states "The clear moral is: if you want to avoid expensive litigation, and possible loss of a valuable right to break you must pay close attention to all the requirements of the clause, including a formal requirement and follow them precisely".

Therefore, any thought that tenants might be able to satisfy Break pre-conditions by partly or substantially complying with the pre-conditions should be dismissed.  It continues to be imperative that the party exercising a Break Clause carefully considers the wording of the clause to ensure strict compliance with any pre-conditions.