- It is important to check the notice provisions in a lease before serving a break notice
- Title checks should be undertaken to ensure that notice is being served on the correct landlord
- In certain circumstances, it may be possible for landlords to waive strict compliance with the terms of the lease
In the October 2010 edition of Property update, we saw how a break notice was invalid because it had been served on the wrong landlord. In MW Trustees Ltd v Telular Corporation, a tenant had a lucky escape in similar circumstances.
The tenant served notice to break on its former landlord by mistake. When that landlord informed the tenant that it had sold the property, the tenant then emailed a copy of the notice to the existing landlord. The landlord forwarded the email to its managing agent.
The managing agent responded to the tenant, saying:
"We accept the attached letter and can confirm we are happy for you to break the Lease, however please could you re-address this letter to [address of current landlord]".
In these proceedings, the landlord contended that the notice was not effective to break the lease, because:
- It was addressed to the former landlord, not the actual landlord
- It had been served by email. The lease required notices to be served by special delivery, by post or by hand.
The court thought that any criticism of the landlord's conduct by the tenant was unjustified. The lease was a commercial arrangement, and the landlord was perfectly entitled to take whatever position it was advised was appropriate in order to protect its position. The difficulties posed by the case arose out of the failure of the tenant to properly serve the notice in accordance with the clear provisions in the lease.
Nonetheless, the tenant argued that the landlord had waived any defect there might have been in the notice by virtue of the email from its managing agent. Alternatively, the tenant claimed that the landlord was estopped from denying the validity of the notice.
The court agreed with the tenant that it was not a requirement of the lease that the notice be addressed to the landlord, as opposed to being sent to it. The break clause simply provided that the tenant had to "give" notice to the landlord. Applying the principles in Mannai Ltd v Eagle Star Insurance Co Ltd, a reasonable recipient of the notice would not have been misled as to the tenant's intention to terminate the lease because the notice was addressed to the wrong person.
The court then turned to whether the email from the managing agents had the effect of dispensing with the requirements for service of notice set out in the lease. The court thought that it did. The email accepted, on behalf of the landlord, that the notice had the effect of terminating the lease on the break date. The landlord was therefore estopped from subsequently challenging the validity of the notice (alternatively it had waived the requirement for notice to be served in accordance with the lease). The landlord could have withdrawn that concession at any time up to 31 August 2009 (notice to terminate had to be served before 1 September 2009), but withdrawal after that would be too late.
The break notice was therefore effective to terminate the lease.
Things to consider
The court thought that the fact that the notice was addressed to the wrong landlord was not a defect because it had in fact been sent to the right landlord, and a reasonable recipient of the letter in those circumstances would not have been misled by the error. One can however imagine circumstances where an error in the name on the notice could be fatal. For example, if a number of companies share the same registered office, the tenant may find it difficult to show that a notice addressed to the wrong company was "given" to the correct company.
The court commented that if the landlord or its agent had simply acknowledged receipt of the notice and said nothing more, it would have been open to them to challenge the validity of the notice. There is no duty on a landlord served with a document to inform the server that he believes it has not been validly served.
For that reason, tenants should not rely on this case as a "get out of jail free" card. It is essential to get the process right from the beginning and ensure that notices are served on the correct person, in accordance with the procedure laid down in the lease.
Landlords should be careful what they say when acknowledging receipt of break notices, otherwise they may find that they have inadvertently waived their right to insist on strict compliance with the terms of the lease.
What will constitute an "indispensable" requirement for valid service may vary from lease to lease. Legal advice should always be sought when dealing with the exercise of break rights.