Mistakes that mean landlords lose right to break-up

Landlords looking to terminate a lease have received a blunt reminder of what it takes to serve a valid break notice after a legal battle reached the High Court.

The ruling in Vanquish Properties (UK) Limited Partnership –v- Brook Street (UK) Limited centred around premises ear-marked for development on Fenchurch Street in London.

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, 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 s.34 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.

Explained Commercial Property legal expert Alexandra Pilc of solicitors Ashtons in Ipswich: “This case highlights the potential consequences of not taking comprehensive legal advice at the outset, with the drafting of the overriding lease causing issues later on.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.”

“Unlike a limited company or a limited liability partnership, a limited partnership is not a legal entity in its own right, which is why it cannot hold a lease.In recent years, limited partnership structures have become increasingly common in property investment, but everyone involved needs to make sure they understand the implications of whatever ownership or business structure they adopt.”