Non-compliant break notice deemed valid by High Court

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Summary: In an important recent decision, the High Court has ruled that a tenant’s break notice was valid even though it did not comply with a requirement in the break clause that any notice must be expressed in a particular way. Non-compliance with the requirement did not invalidate the notice.

Summary

The High Court has ruled that a tenant’s break notice was valid even though it did not comply with a requirement in the lease that the notice be expressed in a specific way.

In the recent case of Siemens Hearing Instruments v Friends Life, the High Court ruled that a tenant’s break notice was valid even though it failed to comply with a specific requirement of the break clause in the lease.

Background

In 1999 the landlord let the commercial premises to the tenant on a 25 year lease.  The lease was protected by the Landlord and Tenant Act 1954 (the 1954 Act).

The lease contained a break option which allowed the tenant to determine the lease on 23 August 2013 by giving notice which “must be expressed to be given under section 24(2) of the 1954 Act”.

The tenant served a break notice but did not include any reference to Section 24(2) of the 1954 Act.

The High Court was asked to consider whether the break notice was valid even though it was not, as the lease required, expressed to be given under Section 24(2) of the 1954 Act.

Why a requirement to reference Section 24(2) of the 1954 Act?

Both the landlord and tenant agreed that the requirement in the break clause, for the tenant to express that the break notice was given pursuant to Section 24(2) of the 1954 Act, was there to avoid the risk that the tenant could determine the tenancy on the break date and simultaneously request a new tenancy under the 1954 Act (a perceived risk at the time the lease was granted in 1997 but resolved by a later court ruling).

Arguments before the Court

The tenant argued that the notice was valid despite the absence of the required wording because the wording was meaningless; there was no such thing as notice under Section 24(2). Further, the failure to state the meaningless words should not automatically render the break notice invalid.

The landlord argued that the break notice was clearly invalid. The required wording was not meaningless; its purpose was to give the landlord the means to defeat an application by the tenant for a renewal lease. The requirement was part of the process of exercising the break option and should be construed strictly.

Court’s two-step approach

The Court considered first whether the break notice complied with the requirement in the break clause and raised three main points:

  1. The omission of the words from the break notice was not the kind of mistake which could be corrected in accordance with the House of Lords decision in Mannai Investments v Eagle Star [1997] A.C 249 (i.e. a simple slip or omission which, on the face of the notice, a reasonable person would be aware was a mistake).
  2. There is no doubt about the meaning of the words “must be expressed to be given under Section 24(2)”. Even if they are meaningless, in the sense that there is no such thing as notice under Section 24(2), that is what the break clause requires.
  3. The requirement cannot simply be disregarded, as the tenant claimed. There was no difficulty for the tenant in complying with the requirement.

The Court therefore found that the break notice was not compliant with the break clause.

However, the Court then went on to consider whether non-compliance automatically rendered the break notice invalid.

Is there a strict and inflexible rule relating to break clauses whereby any non-compliance with its terms is fatal? Apparently not. The Court ruled that the break notice was valid despite its non-compliance with the strict requirements of the break clause in the lease.

The Judge said where the notice is provided for by a professionally drafted contract, and the draftsman has not provided for the consequences of non-compliance “one may reasonably assume that this is deliberate, and it is natural to conclude that it was intended that the notice should, at least in some circumstances, but not necessarily all, survive non-compliance.”

The Judge considered that the timeliness of the notice (i.e. that it is served within the specific timeframe of, say, 6 or 9 months before the break date) and the fulfilment of break conditions (i.e. payment of rent or delivering vacant possession) are almost certainly mandatory but use of  required words specified in the break clause is not mandatory.

Where do we go from here?

Recent case law has taken a strict approach to compliance with break clause requirements but this departure from the norm is likely to give rise to even more litigation over the interpretation of break clauses.

There was no suggestion that the tenant had deliberately omitted the wording. It was a poorly drafted break notice that was saved by judicial interpretation, which is never satisfying for landlords or tenants who are looking for certainty when dealing with break notices. The landlord, Friends Life Limited, is likely to appeal this decision to the Court of Appeal.

The key point for landlords is to ensure that if you intend to make non-compliance with the terms of a break clause fatal, you should say so explicitly in the lease.

This case is also a reminder to both landlords and tenants that the service of break notices is still a highly litigious area and legal advice should be sought both before break notices are served and when they are received to check validity and/or consider whether they can be challenged.

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