The High Court has recently held that a break notice served on behalf of someone who had not yet been registered as the proprietor of the leasehold title is not sufficient to end the lease.
A ten year lease was granted to the original tenant in March 2013 with a break clause allowing the tenant to terminate in March 2018 by providing nine months’ prior written notice. The tenant’s business was acquired by another company and the tenant applied to the landlord for a licence to assign the lease to the new company. This was granted but contained a covenant requiring registration of the assignment of the lease at the Land Registry within 10 days. This was never done. On 2 May 2017, the new company sent a notice to the landlord purporting to exercise the break clause. The landlord refused to accept the break notice, saying it was invalid, as it had been served on behalf of someone who was not the legal tenant at the time, but was merely the beneficial owner. The High Court agreed; the break notice was invalid and the lease therefore continued.
While this case is largely on its facts and does not contain new law, it serves as an important reminder of some important practical points:
- For many purposes, it is the legal tenant who has rights and powers under a lease, and until an assignee of a registered lease becomes the registered proprietor it is not strictly the tenant.
- When dealing with a lease assignment, it is important to consider if the lease is registered (and, if not, if it will be registrable following the assignment), in order to ensure that the form of the assignment is correct and that it is registered in a timely fashion.
- It pays to have a solicitor check the terms of any break clause carefully to ensure that any break notice served is effective. If there are problems with the tenant’s title to the lease you may be required to serve more than one notice to ensure that the break is exercised properly.
Nick Foote is based at Nalders Truro Head Office and can assist with commercial property queries across the County and beyond.