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MIND THE GAP: Break Notices And The Registration Gap

(Sackville Property Select II (GP) No.1 Ltd & Aor -v- Robertson Taylor Insurance Brokers Ltd & Anor [2018] EWHC 122 (Ch))

In this case, the second defendant (Integro) took an assignment of the lease from the first defendant, Robertson, on 29 March 2017. Despite Integro covenanting to register its leasehold interest within 10 business days of the assignment, Integro took nearly 3 months to register its leasehold interest at the Land Registry (the registration gap). It was finally registered on 7 July 2017 and it was during this registration gap, on 2 May 2017, that Integro also attempted to serve a break notice on the landlord terminating the lease.

The landlord challenged the validity of the break notice on the basis that Integro was not the ‘tenant’ and that it was Robertson, as the registered proprietor of the leasehold title at the time the notice was served, that was the tenant under the lease.

The Court agreed with the landlord and found that the break notice should have been served by Robertson. Integro, was merely an equitable assignee pending registration of its leasehold interest and was not capable of serving a valid break notice.

Integro further attempted to argue that the notice sent was served for and on behalf of Robertson but this was rejected by the Court as there was no evidence to this effect. The Court determined that the break notice served was invalid and the lease therefore continued.

Practical points

This case demonstrates how careful companies must be when serving break notices; not just to ensure that all conditions of the break clause are complied with but also to ensure that the recipient and sender are the correct entities under the lease.

Simple mistakes can invalidate a break notice and can be extremely expensive. In this case, the lease had a passing rent of just under £220,000 per annum (which was subject to review) with another 5 years until the contractual expiry date.

If you are taking an assignment of any form of property and expect to have to serve notices shortly thereafter, it is often useful to add in assistance provisions within the assignment requiring the seller/previous tenant to assist in serving the notices, on your behalf, during the registration gap.

 

by Siân Westby
Solicitor (Litigation)

Pierre Vannerem