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Breaking Out!

In MW Trustees Limited and Others v Telular Corporation, the landlords sought a declaration that the tenants had failed to effectively serve a notice to terminate pursuant to a break clause.

The break clause read as follows:

If the Tenant shall wish to terminate this Lease on the Break Date [i.e. 1st March 2010] and shall give to the Landlord not less than six months [notice] in writing to do so and up to the Break Date the Tenant has paid all the Rent and other sums due under this Lease, then on the Break Date this Lease shall cease and determine, but without prejudice to any claims which either party may have against the other for breaches of the covenants and conditions of this Lease occurring prior to the Break Date.

The service provisions in the lease were:

Any notice to be served by any party to this Lease must be given in writing and shall be valid only if:-
(a) It is sent by special delivery post or delivered by hand.
(b) It is sent:
(i) To a company, at the registered office of the company
(ii) Where the receiving party is not a company, at the address shown in this Lease or such other address as that party may notify to the other parties from time to time.
(iii) in the case to the Tenant only, to the premises.

Clause 8.7.2 provided that service of any notice will be deemed to be effected:-
(a) By hand, at the time of delivery, or if delivered after 4pm on a working day, on the next working day
(b) By special delivery post, on the expiry of 2 days from delivery into the custody of the postal service.

There had been a change in the landlord and notice of the change had been accordingly served. However despite the notice of change the tenants served the notice to terminate on the previous landlord. The notice, sent by special delivery, read

this letter is to inform that Telular Corporation wishes to exercise its right to terminate its lease according to section 8.8.1 of our lease for the [premises] …… on the Break Date of March 1, 2010. If Telular Corporation is required to submit any additional information to secure this Break Date lease termination, please do not hesitate to contact me…..

Following an exchange of emails the tenant discovered that the notice had been sent to the wrong party and emailed the managing agent informing them of the wish to terminate the lease. The managing agent on behalf of the landlord responded stating:

Dear Ms Voltz We accept the attached letter and can confirm we are happy for you to break the Lease, however please could you re-address this letter to the following address:- Posel Trust MW House 1 Penman Way Grove Park Enderby Leicester LE19 1SY. I look forward to hearing from you soon….

The court concluded that the landlords by their actions knew full well the tenants intended to terminate the Lease and that the managing agent on their behalf accepted the notice to terminate the lease. The court held that in sending the email in the form that the managing agent did, he represented that this was the Claimants’ position and accordingly they were prevented from subsequently challenging the validity of the Notice or alternatively they had waived the requirement for the Notice to be served in the way specified in the Lease.

The court therefore held that the tenants have plainly acted on the basis that there was no issue and that it had served an effective Notice. The landlord’s application was accordingly refused.

This case emphasises the importance of reading the lease and ensuring that you are familiar with the file before undertaking any work on behalf of a client. It also makes clear that agents should be very cautious before acknowledging break and option notices lest they prejudice their client’s position.

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