Anybody who is involved in property matters (be it landlord, tenant, agent or legal adviser) needs to know how to draft and serve a notice in accordance with the underlying contract or statute, otherwise there could be serious (and unwanted) repercussions.
The recent High Court case of Vanquish Properties (UK) Limited Partnership v Brook Street (UK) Limited is a blunt reminder of the strict requirements for serving a valid break notice.
Background
Serving a notice is often a vital step in creating, exercising, maintaining or terminating legal rights in a lease, sale contract, development agreement or option or pre-emption agreement. A notice should be drafted and served strictly in accordance with the relevant contractual or statutory provisions. Failure to do so can lead to the loss of legal rights or unwanted continuing legal and financial obligations.
In the Vanquish Properties (UK) Limited Partnershipcase, a landlord lost its right to terminate its lease early because the break notice was incorrect.
Facts
The case centred around a 10 year lease of a property on Fenchurch Street (expiring in 2021), which was earmarked for development.
- The property was originally leased by The City Corporation as landlord to Brook Street as tenant.
- The lease contained a landlord's break right to terminate the lease on 27 September 2016 on six months' notice.
- The City Corporation subsequently granted an overriding lease to a developer, "Vanquish Properties (UK) Limited Partnership acting by its general partner Vanquish Properties GP Limited", who became Brook Street's direct landlord.
- Shortly after the grant of the overriding lease, Vanquish's lawyers served a break notice on Brook Street to terminate the lease. The break notice stated that it was served on behalf of "Vanquish Properties (UK) Limited Partnership, the landlord of the property".
The problem with both the overriding lease and the break notice was that it is legally impossible forVanquish Properties (UK) Limited Partnership, as a limited partnership, to hold a lease. A limited partnership (unlike a limited company or a limited liability partnership) is not a legal entity in its own right and cannot own any property. A limited partnership must have a trustee, usually a general partner, who manages the limited partnership's business and holds any property on behalf of the limited partnership.
Brook Street challenged the validity of the break notice on this basis. It argued that as a limited partnership has no legal existence, Vanquish Properties (UK) Limited Partnership could not be its landlord and therefore could not serve a break notice.
Conclusion
The Court agreed that the overriding lease could not be granted to the limited partnership. As such, the overriding lease had never been properly granted and Vanquish Properties (UK) Limited Partnership could not have given a valid break notice.
In fact the Court implied that Vanquish Properties GP Limited, as the general partner of the limited partnership, was the tenant under the overriding lease and Brook Street's landlord. It should have been this entity that served the break notice.
What does this mean for you?
Limited partnership structures have become increasingly common as investment vehicles in the last few years, due to their tax treatment and transparency.
It is important to fully understand the structure of an investment vehicle and the legal implications of that vehicle before entering into a contract and serving any notices. Courts construe notices strictly and are unlikely to excuse mistakes.
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.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.