Commercial Property Focus - May 2009
Take a break
Read the lease carefully before you
embark on a tenancy break
Break clauses have become very important in
the current economic climate and tenants need to be aware that time
limits to break the lease may be strict. This means that the
operation of a tenancy break will require careful reading of the
lease.
The recent case of Orchard
(Developments) Holdings PLC v Reuters (2009) shows the
problems that can happen when service of a notice is left to the
last minute by fax.
The tenants in this case had left the service
of the break clause until the last minute and it needed to be
served by the Saturday. A process server delivered the letter
on the Friday and copies were faxed on both the Friday and the
Saturday. It turned out that the letter had been posted to
the wrong mailbox. The issue then was whether the fax had
amounted to service. The lease stated that “all applications,
notifications, consents and approvals must be in writing unless the
receiving party or its authorised agent acknowledged receipt; a
notice is valid only if it is given by hand or sent by registered
post or recorded delivery.”
The letter had not been served correctly, so
the argument was whether the faxes were valid service (which were
not a valid method of service unless acknowledged). The
landlord’s solicitor refused to acknowledge receipt and it was only
16 months later once proceedings had been issued that the
landlord’s solicitor acknowledged that the faxes had been
received. The tenants argued that this acknowledgement had
retrospectively validated the faxes and notices to break had now
been served. On appeal the court found that this notice had
not been validly served as the acknowledgment had happened some
time well after the break point and the consensus of the Judges
views were that the lease did not oblige the landlord to
acknowledge. The court found it was impossible to acknowledge
receipt some months after the break point. The moral of the
tale is that service of a break notice must follow the terms of the
lease and any time limits must be strictly complied with.
This article first appeared in the Daily Post
Viewpoint, published on 13 May 2009.
Sian
Evans
Property Litigation Partner
Weightmans LLP
sian.evans@weightmans.com