UK: Notice your Notices

Last Updated: 2 September 2010

Three recent Court decisions have emphasised the difficulties which can arise when dealing with notices. Such issues can be critical for both landlords and tenants as they may find themselves unable to take advantage of their rights under a lease as a result of a defective notice.

Hexstone Holdings Ltd v AHC Westlink Ltd [2010] EWHC 1280 (Ch)

In this case the lease provided the tenant with an option to terminate the tenancy on a specified date, on six months' written notice. After entering into the lease, the tenant went through a merger and announced that it would be taking the same name as its parent company. Although the landlord sent rent demands under the name of the parent company, the change of name never officially occurred. The tenant served notice to terminate the lease in a letter on the parent company's headed notepaper and it was expressed to be "for and on behalf of" the parent company.

The Court noted that the lease specifically required notice to be given by the tenant. The fact that the landlord had demanded and received rent from the parent company was considered insufficient to imply that the parent company had the necessary authority to act on behalf of the tenant. Similarly, the tenant's announcement that it was to change its name to that of the parent company was irrelevant since the headed notepaper on which the notice was served carried a different company number to that of the tenant.

There being no clear indication that the parent company had the tenant's authority as agent or otherwise to serve the notice, the Court held that notice had been given by the wrong entity and was invalid. The tenancy was therefore to continue for the remainder of its term.

Hotgroup Plc v Royal Bank of Scotland Plc [2010] EWHC 1241 (Ch)

Whereas the previous case involved the notice being served by the incorrect entity, this case involved the notice being served on the incorrect entity.

The claimant landlord had demised parts of two floors of a building to the defendant tenant. The lease included a break clause allowing the tenant to terminate the lease on a specified date, provided that not less than nine months' prior notice was given to the landlord. The lease required the notice also to be served on a specified property management company or to such other address as the landlord notified to the tenant.

Although the tenant served the notice at the correct time, the notice was only served on the landlord. The tenant failed to serve notice on the property management company as required by the terms of the lease. The tenant argued that the lease should be construed contra preferentem, i.e. against the party seeking to rely on it, and disagreed that notice to the management company was required. Alternatively, it suggested that the timetable for the service of the notice on the management company was more relaxed. However, the Court decided that, even when construed against the landlord, the words of the lease were clear and the break clause had not been validly exercised by the tenant. Again, the tenant here found itself with a continuing tenancy.

Michael Gerson (Leasing) Ltd v Greatsunny Ltd (unreported)

In this case, the claimant was in the business of equipment leasing and the defendant was the owner of a property where K was the tenant. The claimant entered into an equipment lease with an associated company of K to supply equipment to the premises. The parties agreed that most of these items would become part of the premises once installed. As consideration for this agreement, the claimant supplier and defendant landlord entered into an agreement ("the Landlord's Waiver") which included the following provision:

"in the event we [the landlord] determine the lease we will give you [the supplier] notice of the termination and thereafter 28 days in which to remove the equipment."

K found itself in financial difficulties and went into administration. The claimant terminated the equipment lease. The defendant terminated the lease of the premises and informed the claimant orally. Two months later (during which time the claimant had not sought to regain possession of the equipment), the defendant granted a new lease of the property to a new tenant with use of the equipment. No right of entry was reserved in order to allow the claimant to retrieve its equipment.

The claimant argued that the defendant was required to give written notice of the termination of the lease to K and that the defendant was also required to give written notice of the 28 day period in which the claimant could remove the equipment.

The Court found that the lease did not require notice to be given in writing and there was no need to infer such a requirement. It also held that there was no commercial reason to imply the two-stage notice process argued for by the claimant; a literal construction of the claimant's document made it clear that the claimant had 28 days in which to retrieve the equipment once notice was given about the termination of the lease. By failing to do so, the claimant's rights in respect of the equipment had been extinguished.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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