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Break notices

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Whether a ‘registration gap’ invalidated service of a break notice.

The background

In Sackville UK Property Select II (GP) No. 1 Limited v Robertson Taylor Insurance Brokers Limited [2018], the residue of an unregistered lease was assigned by Robertson to Integro, who had acquired the Robertson business. The Licence to Assign contained a covenant whereby Integro was required to apply for registration at HM Land Registry within ten business days of the assignment’s completion, but this did not take place.

The assignment was completed on 29th March 2017, but completion of registration was only completed on 7th July 2017. On 2nd May 2017, before it was registered as proprietor of the lease, a break notice was served by Integro on the landlord, purporting to exercise the break option. The landlord argued that the notice had been served by a party which was not the tenant, and was therefore invalid.

The decision

The court found that the break notice should have been served by Robertson, not Integro. Until the assignment was registered by HM Land Registry, Integro held only a beneficial interest in the property; disposition of a property is completed by registration, and the disposition in this case did not take effect until 7th July 2017.

There was no indication that the notice was served by Integro on behalf of Robertson; this was not the intention of Integro, and any reasonable recipient of the notice would not reach a conclusion that this was the case. As a result, the break notice had not been validly served and the exercise of the break was not therefore effective.

Advice and action for landlords

This is a useful reminder for landlords when completing assignments – whether as transferor or transferee – that even after completion, only the registered proprietor is permitted by law to serve notices pursuant to the lease terms.

Completion of the assignment is only perfected by registration, and the registration gap must be considered when a party wishes to serve any notice under the lease. Where the transferee wishes to serve a notice, it must be made expressly clear that the notice is served on behalf of the transferor as the registered proprietor.

Until the assignment was registered by HM Land Registry, Integro held only a beneficial interest; the break notice had not therefore been validly served by the registered proprietor of the lease.

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