An Overriding Omnishambles: Recent Break Clause Developments

Two recent cases provide salutary lessons in how to serve break notices and also in how to draft them. The firmament of break clause cases has been so enriched in recent years with cases such as M&S and Ibrend that fanatics of break clause litigation will have had their thirst slaked. However, this is a rich seam and two recently unearthed gems merit consideration.

Vanquish Properties (UK) Limited Partnership v. Brook Street (UK) Limited [2016] EWHC 1508 (Ch)

Background

The City of London (City) granted Brook Street a 10-year lease in 2011. The lease contained a landlord's break option allowing termination on not less than six months' notice. In March 2016, City granted Vanquish Properties (UK) Limited Partnership acting by its general partner, Vanquish Properties GP Limited, an overriding lease of the property, so that Vanquish became Brook Street's immediate landlord.

No doubt keen to enjoy its exciting new bundle of legal rights, immediately upon the grant of the overriding lease, Vanquish sought to determine Brook Street's interest in the property by exercising the break right. The notice stated:

"We...solicitors and agents for Vanquish Properties (UK) Limited Partnership the landlord under the Lease (the "Landlord") notify you as follows:

The Landlord hereby gives you notice pursuant to clause 7 of the Lease that the Lease will determine on 27 September 2016".

Issues

There were two key issues: (i) who was the landlord for the purposes of serving the break notice? and (ii) what would the reasonable recipient of the notice understand it to mean?

Who was the Landlord?

This is not a question that should often be asked. It is usually blindingly obvious who the landlord is. However, in this case the question of legal personality and the law concerning trustees and partnerships combined to complicate matters.

Question - when is your landlord not a landlord? Answer, when it is a limited partnership.

A limited partnership does not have a separate legal personality and therefore cannot hold a legal estate in land. Therefore, on the face of it, Vanquish Properties (UK) Limited Partnership could not, in its own right, be the landlord and by extension could not serve the break notice.

In scratching for an argument, Vanquish submitted that the limited partnership could still be the landlord as the overriding lease could be construed as being granted to the first four named partners of the partnership in accordance with the provisions of the Trustee...