A letter asking for solicitors' client account details was held to be a valid extension of an option period, even though it did not specifically request that the option period be extended. The option was granted for ten years but could be extended for a further five years. This was provided notice was given to the landowner or their solicitors before the expiry of the initial ten year period and upon payment of a fixed sum to the landowner.

Prior to the expiry of the option period, the developer's solicitors wrote to the landowner's solicitors referring to the extension clause in the Option Agreement. They stated that they would shortly be placed in funds for the required sum and requested the solicitors' bank account details so that payment could be made. The question arose as to whether the letter constituted a valid notice to extend the option period.

The court found that it did. It applied the test in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd, holding that a reasonable recipient of the letter would have been left in no reasonable doubt that the developer was seeking to extend the option period. The intention of the sender was not relevant.

The first instance decision in this case came out earlier this year. The High Court's judgment has now been upheld by the Court of Appeal.

Rennie v Westbury Homes (Holdings) Ltd

Things to consider

The developer in this case did not want to exercise its right to extend the option. However, the objective, rather than the subjective, nature of the Mannai test means that clients who are still uncertain about whether or not to exercise their rights under option agreements or leases should take care in correspondence with the other side. This is particularly the case when the time limit for exercise of the option is drawing near.

A simple statement that "this letter is not intended to constitute notice pursuant to clause [] of the agreement" should suffice.