Landlords and tenants both know that the successful operation of a break option is hinged on a number of factors. Get it wrong and the consequences can be costly.
The case of Levett-Dunn v NHS Property Services Limited [2016] EWHC 943 (Ch) concerned whether a break notice had been validly served by a tenant so as to operate the break option contained within a lease.
Background
The tenant’s office premises on the Wolverhampton ring road were let pursuant to three identical leases dated 27 September 2010 for a period of 10 years at a combined rent in excess of £200,000 per annum. The tenant served break notices, pursuant to each lease, stating that it wished to exercise the break to bring the leases to an end on 10 July 2013. To be valid, the notice had to be given by 11 January 2013 (being six months before the break date). The lease also stated that the notice had to be sent to the “last known place of abode or business” of the landlords.
The landlords were named in the lease as Frederick Levett-Dunn, Simon Levett-Dunn, Howard Evans and Barnett Waddingham Trustees Ltd. The landlords were, at the time that the lease was entered into, also the trustees of the Howard Evans Roofing Ltd Retirement Benefit Scheme (“the Scheme”), established to provide benefits for the directors of Howards Evans Roofing Ltd (“the Company”). The three individuals were beneficiaries of the scheme or directors of the Company.
The address given in the lease for the landlords was 75 Tyburn Road, Birmingham, which at the time that the lease was entered into, was a trading address of the Company.
Four separate notices, one addressed to each of the parties named as landlord were delivered by recorded delivery on 19 December 2012 to 75 Tyburn Road. The letters were signed for, although the signature was described as “wholly illegible”.
In May 2011, the Company went into administration and its business was sold. Thereafter, 75 Tyburn Road was occupied by a company called “Floors 2 Go Ltd” which was owned by Mr Simon Levett-Dunn. However, at some point in 2010 or early 2011, Mr Simon Levett-Dunn had ceased to be a trustee of the Scheme. No notice of the change in landlord was given to the tenant and it had no reason to believe that Mr Simon Levett-Dunn had ceased to be one of the landlords. Mr Howard Evans had had no connection with 75 Tyburn Road since 2002 and neither had Mr Frederick Levett-Dunn since c.2009. Barnett Waddingham Trustees Ltd had never conducted any actual operations of its own at 75 Tyburn Road. Accordingly, at the date that the leases were entered into in 2010, Mr Simon Levett-Dunn was the only one of the persons being the “landlord” that had any active business connection with 75 Tyburn Road.
The question for the Court was whether the tenant was entitled to rely on service of the notice on Mr Simon Levett-Dunn at 75 Tyburn Road, notwithstanding that he no longer had any interest in the property.
In the alternative, the tenant argued that s.23(2) of the Landlord and Tenant Act 1927 applied. This section states that unless and until a tenant has received notice that a landlord has changed and the name and address of the new landlord has been provided to the tenant, any notice served by the tenant on the landlord specified in the lease will be deemed to have been served effectively. This section was not expressly incorporated into the lease in this case but the tenant argued that it was of general application.
Decision
The High Court held that the break notices had been served effectively. Describing the landlord as “of” an address plainly means that this is his address. If circumstances change, the landlord has it in his own power to inform the tenant of a new address. If he does not do so, it is not unreasonable that the risk of non-receipt of documents falls on the landlord.
However, the Court rejected the tenant’s argument in relation to s.23 and stated that this had to be specifically incorporated in a lease in order for a tenant to rely on it.
Practical considerations
Landlords should ensure that they include a specific address in the lease for service of documents and that they update tenants if and when necessary.
Whilst the onus is on landlords to update tenants, tenants should also ensure that they take reasonable steps to establish the landlords’ current address to minimise the risk of disputes regarding service.
Tenants and practitioners should consider including s.23 of the Landlord and Tenant Act 1927 in their leases to ensure that unless and until they have received notice of a change of landlord, they can rely confidently on the landlord’s address given in the lease.
June 2016
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