Assigning a lease or exercising a break clause? First consult a lawyer
Posted on March 27, 2018
When assigning a commercial lease or exercising a break clause, sensible tenants know that taking legal advice is mandatory. In one case that underlined the point, a series of errors resulted in a company being burdened by a costly and lengthy lease that it did not want.
The case concerned a lease of office premises at an annual rent of almost £220,000 which was due to continue until 2023. The original tenant had, with the landlord's permission, taken steps to assign the lease to another company. There was, however, a delay in registering the assignment and that was not done by the time the second company served a notice on the landlord purporting to exercise a break clause in the lease.
The landlord refused to treat the lease as having been brought to an end on the basis that the first company, not the second, was the tenant on the date that notice was given. The landlord applied to the High Court for summary judgment in the form of a declaration that the lease had not been validly terminated.
In ruling on the matter, the Court acknowledged that the second company was the beneficial owner of the lease prior to its registration and on the date when notice was given. However, in granting the landlord's application, the Court noted that the lease remained vested in the first company on the relevant date. On a true interpretation of the lease, it was the first company that should have issued the notice.
The Court rejected arguments that a reasonable recipient of the notice would have realised that a mistake had been made and that the notice had been served on behalf of the first company. The decision meant that the second company would continue to be bound by the terms of the lease until its expiry.
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