Technicalities and details matter generally in life but especially when it comes to legal matters. A recent case demonstrates the risks associated with timing and technicalities when it comes to commercial property – you can read the full reported case here.
Our summary of the case is :-
Dispute over validity of property lease break clause
- The case related to a long commercial office lease of 10 years with a substantial rent of £200,000.00 per year.
- The commercial property lease had a clause enabling the tenant to serve notice to break the lease early at set periods.
- To be valid, the break clause would need to be validly served by a set deadline 6 months prior to the early termination date.
- The clause in the lease relating to service incorporated statutory rules regarding the service of notices together with contractual wording relating to where the notice should be served by reference to a specific address. In the event, the entity which had been the original landlord no longer existed and all but 1 of the people to be served no longer had any form of presence at that address (see more below)
- As happens far too often tenants did not seek to serve the notice until the day before the expiry date for it to be served, giving no margin for error or ability to follow up and do it again in the event of any concern or dispute as to receipt or valid receipt.
Notwithstanding whether the termination notice was valid was the lease surrendered?
In this case the tenant sought to obtain confirmation from the landlord that the notices had been received straight after serving and by email (by reading the full case you will find out what the status of that email was when it was not responded to).
Subsequently, after notifying the tenant that the validity of the break notice was being disputed, the Landlord still agreed to certain actions which could constitute, in law, agreeing to the lease being surrendered. These steps and their factual and legal status are detailed fully in the case transcript but, in summary the landlord accepted, at least on a temporary basis, the keys back from the tenant.
- the landlord accepted some control and responsibility for utilities at the premises.
- the landlord started marketing the premises to new potential tenants and agreed heads of terms with a prospective tenant.
- the landlord eventually re-let part of the premises.
- the important point to note from the above is that, on the facts of the case, none of the first 3 actions by the Landlord were sufficient to demonstrate an agreed surrender of the lease. It was only the final re-letting which constituted surrender.
The case outcome
The Court determined that service had been effective of the break clause on the facts of this case. The finding about surrender made by the court, detailed above, was a secondary finding.
Important lessons from this case
- From a landlord or tenant perspective, the drafting of the clause in the lease about valid service of notices was not ideal. By linking valid service to a specific address with a long lease was a recipe for problems. landlords and tenants can change with long leases and the issues created confusion as to validity.
- tenants are well advised not to leave service of notices to the last minute. Doing so leaves no margin for error or ability to check valid service and re-serve if necessary based on possible problems. technicalities matter and getting it wrong with notices is a particular problem with both residential and commercial property leases.
- The issue of whether or not a lease has been surrendered is complex and depends on facts. A tenant should not assume that just because a landlord has accepted keys to a property, has assumed other responsibilities or has even agreed formal heads of terms with a new tenant may not be legally sufficient to demonstrate surrender.
If you require any advice or assistance on any aspects of commercial property law or a dispute over commercial premises, whether as a landlord or tenant, this is an area where we have considerable speciic experience.
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