Conditional break clauses

The decision in the case of Siemens Hearing Instruments Ltd v Friends Life Ltd will give tenants some hope that the Courts may now be beginning to take a slightly "softer" approach when it comes to considering whether a conditional break provision has been complied with.

Facts

This case concerned a lease of commercial premises for a term of 25 years. The lease contained a provision allowing the tenant to determine the term on 23 August 2013 by giving to the Landlord not more than 12 months’ and not less than 6 months’ written notice “which notice must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954.”

The requirement to serve a notice under s24(2) of the '54 Act was included to address a historical problem relating to the service of s26 notices in conjunction with break notices by tenants seeking to renew their leases at a lower rent. This problem was in fact resolved by case law in the mid-nineties, but although it was not strictly necessary to include this requirement when the lease was granted in 1999, it nonetheless appeared in the lease and so could not be ignored.

The tenant served what was otherwise a valid break notice, but failed to state that the notice was given under section 24(2).

Despite this failure the Court upheld the validity of the break notice. 

The reasoning behind the Court's decision seems to be that whilst the notice did not comply with the requirements of the break clause, the clause did not expressly set out the consequences of non-compliance.  As a result the court had to consider whether the requirements of the clause were to be treated as indispensable conditions for the exercise of the clause.

Since a notice expressed to be given under section 24(2) would not have given any necessary or relevant information to the landlord, over and above the information contained in the notice served by the tenant, the Court was of the view that the omission of the reference to section 24(2) made no difference to it at all and so the notice was valid.

Comments

Until very recently the Courts have taken a very strict approach to cases concerning conditional break provisions.  It would be foolish for commercial tenants to take too much comfort from this case, and far better for tenants to continue to take a very cautious approach when it comes to complying with break conditions, given the potential consequences and financial implications if the Court concludes that the break is invalid.

Naomi Cunningham is an associate solicitor in the Michelmores property litigation team. For further information on the issues raised in this article, please contact Naomi at naomi.cunningham@michelmores.com.

This information has been prepared by Michelmores LLP as a general guide only and does not constitute legal advice on any specific matter and should not be relied upon as such. We recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of this information.