Problems with break notices - DAC Beachcroft

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Problems with break notices

Published 1 October 2015

Time is of the essence for the exercise of a break option under a lease, which will require the Tenant to serve a break notice sufficiently in advance of the break date.

Tenants must ensure they correctly interpret:

  1. The timing of the break date;
  2. The length of the required notice period;
  3. The mode of service for the break notice;
  4. And ensuring compliance with any break conditions.

However, an error in a break notice may be capable of being cured by the courts in certain circumstances.

A House of Lords decision held that a tenant validly exercised the break right, even though the wrong break date was referred to in the notice. The break option entitled the tenant to terminate the lease at the end of the third year of the term by giving to the landlord six months' prior notice. The end of the third year of the term was 7 November 2004. However the tenant's notice incorrectly stated that it intended to exercise the break at the end of the third year of this lease on 22 August 2004 – which led to the landlord challenging the validity of the notice.

The House of Lords said the key question was how a reasonable recipient would have understood the notice bearing in mind the context in which it was given. In this case the reasonable recipient knew that the break date was in November 2004, and having received a notice stating that the tenant was exercising the break option it should therefore assume that the reference to a date in August was a clerical error, and therefore the break notice was not invalidated.

It has to be said, the tenant was extremely fortunate in this case.

As always, extreme care is required in the preparation and service of any break notice.

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