Pictured above: Laura Raby
Laura Raby, commercial property solicitor at Ansons Solicitors
is warning tenants under commercial leases who are finding the
current economic climate tough that although many leases contain a
break clause, unless the break clause is exercised correctly then
the landlord may have the legal right to prevent the tenant from
vacating.
This was highlighted in a recent court case where the
leaseholder (Royal Bank of Scotland plc.) leased part of a property
to a tenant (Hotgroup plc). The lease was for a term of 10 years
with an option to break at the end of the fifth year on giving not
less than nine months prior notice to the landlord. There was an
additional provision in the lease which stated that a copy of the
notice also needed to be served on the property management
company.
The tenant served the notice on the landlord in September 2009,
one month before the right to break expired. However, notice was
not served on the management company until November 2009, one month
after the right had expired.
When the break of the lease was rejected, the tenant went to
Court to try and establish its right to break the lease.
Although the landlord had been validly served, the Court ruled
that the break in the lease had not been exercised because the
management company had not been validly served. The Court stated
that the purpose of serving the management company was to ensure
that a notice did not 'gather dust' in the landlord's offices and
was brought to the attention of the person with the actual
responsibility for the management of the property.
Laura Raby commented: "This case highlights the importance of
carefully considering the terms of a break clause and the mechanics
of serving notice. It is sensible for both parties and their
solicitors to note the deadlines for serving notice and the break
date itself.
"The method for serving notice and any pre-conditions to the
break should be reviewed carefully to ensure the notice to break
the lease is valid. Tenants must ensure they have sufficient time
before the break date to fulfil such pre-conditions as removing any
alterations made, handing back the property in full repair and
ensuring they have sufficient time to move out leaving the property
in 'vacant possession'.
"Other complications can arise if there are sub-tenants in
occupation and also if the sub-tenants have made alterations.
"There are numerous ways in which a break notice can fail and I
strongly advise any tenant who is considering exercising their
break clause to seek legal advice before doing so".
For more information about Ansons Solicitors, please visit their
website here: www.ansonsllp.com