Yet another break notice hazard warning

It seems that barely a year goes by without a break clause related tale of woe emanating from the Courts.

Sackville Property Select II (GP) No.1 Ltd & Anor v Robertson Taylor Insurance Brokers Ltd & Anor can be added to that ever expanding tome. In that case the Court considered the validity of a tenant’s break notice, served by an assignee who had not yet registered the title in its name at the Land Registry.

When it comes to registered land, you only become the legal owner once you are registered at the Land Registry. In the interim the outgoing owner remains the legal owner, and holds the property on trust for the new owner until the registration goes through.

In this case, the assignee hadn’t yet registered the transfer of the lease in its name when it served the break notice. This was held to be fatal to the validity of the notice.  Only the legal owner – the previous holder of the lease, the assignor – could have exercised the break.

Valiantly the assignee tried to argue that it had served the notice on behalf of the assignor. Sadly there was no firm evidence to support this. Even if that argument had held water, would it have been clear, in the circumstances, to the reasonable recipient?  Once again, the court came to a negative conclusion.

The upshot was that the break notice was invalid and the (then) equitable assignee was liable to perform its obligations under the lease for a further five years.

Trite as it may seem, but break notices should be treated with the utmost care. They seem so simple, yet they continue to leave a trail of destruction in their path. If you want to be sure of their efficacy then seek good professional advice.

This article was written by James Daglish, Partner, Real Estate, with assistance from Georgie Sharpley, Trainee Solicitor.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.