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Mistakes that mean landlords lose right to break-up
The ruling in Vanquish Properties (UK) Limited Partnership v Brook Street (UK) Limited again reminds us how difficult exercising break notices can be. Often case law focuses on errors made by the tenant but this case shows a landlord losing its right to terminate the lease.
The premises were let to Brook Street by the City Corporation as freeholder, with a break clause in September 2016 on six months’ notice. When developer Vanquish came along, they were granted an overriding lease, so they would become Brook Street’s direct landlord. But when Brook Street were given notice to terminate the lease under the break clause (because they wanted to redevelop the premises) the paperwork said that it was served on behalf of “Vanquish Properties (UK) Limited Partnership, the landlord of the property.”
Brook Street argued the notice was not valid because a limited partnership has no legal existence and cannot hold property, so Vanquish Properties (UK) Limited Partnership could not be the landlord.
They also argued that the lease could not be held by the individual partners of the limited partnership, as S34 of the Law of Property Act 1925 stipulates that land cannot be transferred to more than four people, but Vanquish had five partners and no partners were specifically named in any of the papers.
The High Court agreed with Brook Street that the lease could not have vested in the Limited Partnership or in some combination of its partners; the overriding lease had never been properly granted, so Vanquish could not have given valid notice.
The break notice was doomed to fail from the outset; with the drafting of the overriding lease setting the scene for the resulting problems. It reinforces how important it is to make sure all contractual requirements are checked, and double checked, whether it’s when a landlord wants to serve a valid notice to break a lease, or at any other stage.
A limited partnership is not a legal entity in its own right unlike a limited company or a limited liability partnership, which is why it cannot hold a lease. In recent years, limited partnership structures have become increasingly common in property investments. It is imperative that everyone involved needs to make sure they understand the implications of whatever ownership or business structure they adopt; another point for solicitors to highlight to their clients.