Serving break notices

A break notice is incorrectly served by a tenant, but the actions of the landlord's agent create an estoppel.  
 
In the case of MW Trustees Limited v Telular Corporation, a tenant had a lease that contained a right to break. The break clause was conditional upon the tenant serving written notice upon the landlord, either by hand or special delivery. The tenant served a notice by special delivery but sent it to the original landlord under the lease instead of the current landlord, a private pension fund. The original landlord told the tenant that the notice had not been served correctly and suggested that the tenant should contact the managing agent for the new landlord. The tenant then emailed the current landlord, attaching its letter to the original landlord, and asked what was required in order to terminate its lease. The current landlord forwarded the tenant's email together with attachment, to their agents who in turn emailed the tenant to confirm the following: "We accept the attached letter and can confirm that we are happy for you to break the lease". The email also asked the tenant to re-serve its notice upon the current landlord as its address for service. No readdressed notice was sent, however. When the break date arrived, the current landlord disputed that a valid break notice had been effectively served.

What did the Court decide?

The court agreed that the break notice had not been validly served on the current landlord. However, it also found that the actions of the current landlord's agent in "accepting" the tenant's break letter had created an estoppel that prevented the current landlord from denying that the lease had been terminated.

Practical point

Clients frequently decide to serve break notices themselves in order to avoid incurring legal fees. Whilst some of the reported cases involved lawyers' failures to effectively exercise a break clause, in many cases, the tenant itself has attempted to exercise the right, without understanding the technicalities involved. Put simply the task is not particularly difficult: the tenant needs to serve a notice on its landlord, in the correct manner, within any deadlines specified and complying with any conditions included in the lease. However, where it would be inconvenient for a landlord to have its lease terminated early, it will obviously look carefully for any grounds upon which to challenge the validity of the break notice with a view to retaining the tenant under the lease. In light of the considerations involved, it is accordingly a risky undertaking for a tenant to seek to effect service of its own break.
In this case, the failure to effect service upon the correct landlord was saved by an estoppel. The estoppel arose out of the landlord's agent confirming acceptance of the tenant's letter, which had been attached to an email sent to them. Unfortunately for the landlord, the judge did not accept that the agent's statement was a mere acknowledgement of receipt. The judge held that the word "accept" went beyond confirmation of receipt. The request made to the tenant for it to reserve its original letter upon the correct identity was held to have been for completeness only.

There are circumstances where service upon an original landlord could be valid, even where the reversion has been assigned. Under Section 23(2) of the Landlord and Tenant Act 1927, a notice served on the original landlord is deemed to have been served upon the current reversioner until the tenant has been notified that the original landlord has ceased to be entitled to the rents and profits of the premises. Whilst in practice most landlords assigning the reversion will have provided the tenant with a rent authority letter, a tenant should always investigate title before serving a break.
  
Naomi Cunningham is a 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