Property Law Leases – Tenant’s Option to Break

A tenant’s option to break clause was served incorrectly and has had expensive consequences. The tenant in Kensington did not follow the terms of their lease and the courts have confirmed that their wish to enact an option to break clause was therefore inoperable.

In a judgement dated 28th May, 2010, the Chancery Division Court confirmed the importance of following the specific details of a lease, where any tenant attempts to enact an option to break clause. (Hotgroup plc v Royal Bank of Scotland plc)

Specific notice terms in the lease were required to operate the break clause. Notices to two parties (landlord and managing agent) were specifically required to be given, in order for the tenant (Hotgroup plc) to enact a break clause.

The tenant served a notice over 9 months before the break point and by the contracted date, in accordance with the lease, to the landlord (Royal Bank of Scotland plc) but not to the property manager. A further notice was served on the property manager but within 9 months of due date.

Despite the parties being connected and no formal notice period being stated in relation to the required notice period to the property manager in the lease, it was deemed that the notice had not been validly served on the landlord unless both notices had been served by the due date.

The tenant was not deemed to have served the notice in accordance with the lease, and the break clause was therefore not operable. The lease was not drafted in such a way as to enable the landlord to make a claim for damages, and the tenant was committed to a further 5 years of rental until the end of the tenancy.

26th July 2010