Your business has outgrown its premises. You find somewhere better, check the lease and spot a reassuring phrase: six months’ notice. You assume you can give notice, pack up and leave.
That assumption could be expensive. A commercial lease may allow you to leave early only on one particular date. Miss the deadline for exercising that right and you could remain liable for rent for years. But what if you serve notice in time and put the wrong date in the letter? A leading case shows why the answer is more nuanced than you might expect.
Written by Frankie Ng, Litigation Supervisor
Does your lease give you one chance to leave
A break clause gives a landlord or tenant a contractual right to end a lease before its normal expiry. The wording determines when and how that right can be exercised.
For example, a clause allowing a tenant to terminate on the fifth anniversary of the term by giving at least six months’ prior written notice will generally provide a break on that anniversary. It does not ordinarily allow the tenant to leave whenever it chooses after year five simply by giving six months’ notice.
A clause permitting termination at any time after the fifth anniversary on six months’ notice may operate differently. The whole lease must be read carefully, including its definitions and any later variations. Small differences in wording can have substantial financial consequences.
The practical point is to identify both the permitted termination date and the deadline for serving notice. Recording the anniversary in your diary without recording the earlier notice deadline may be too late.
The notice that was one day out
In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, a tenant held two ten-year leases covering office premises and parking in London. Each lease allowed an early break on the third anniversary of the term commencement date, provided the tenant served at least six months’ written notice on the landlord or its solicitors.
The correct break date was 13 January 1995. The tenant served its notices more than six months beforehand and expressly referred to the relevant break clause. However, the notices said that the leases would end on 12 January 1995: one day too early.
The landlord argued that the notices were ineffective. The dispute went all the way to the House of Lords, then the UK’s highest court. By a majority of three to two, the court decided that the notices were valid.
Why the tenant succeeded
The majority considered how a reasonable recipient, knowing the terms of the leases, would understand the notices. In context, it was clear that the tenant was exercising the contractual break right on the permitted anniversary. The incorrect date did not leave a reasonable landlord in doubt about how and when the notices were intended to operate.
This was an objective assessment. The question was not simply what the tenant privately intended, or whether the landlord was willing to overlook a mistake. It was what the notices communicated when read against the relevant background.
A mistake in the letter is different from missing the deadline
Mannai does not give tenants a general right to escape a lease whenever their intentions are clear. The tenant had served its notices in time. The case concerned the meaning of those notices, rather than an extension of the contractual deadline or the creation of a later break date.
If the lease gives only one break opportunity and the tenant misses the notice deadline, sending a notice afterwards will not ordinarily revive that opportunity. Similarly, a clear wish to leave does not dispense with an express requirement about the form or service of the notice, or with other conditions attached to the break.
Those conditions may include payment of specified sums or giving vacant possession. Their effect depends on the wording. A tenant should not assume that moving out, handing over keys or telling the managing agent is enough to end its obligations.
What to check before you serve notice
- Check the complete lease and any variations. Identify the break date, the notice period and every condition attached to the right.
- Calculate the service deadline early. Allow for the lease’s service provisions, delivery times and any deemed service rules. Do not assume the date you send the notice is the date it takes effect.
- Confirm who must receive the notice, at which address and by what method. An email to a familiar contact may not satisfy the lease.
- Plan for the break conditions. Check payments and possession requirements well before the termination date.
- Keep evidence of the notice and its service. If a mistake is discovered, obtain advice promptly while there may still be time to act.
If you have already missed the opportunity
Obtain advice before committing to replacement premises or stopping rent payments. Depending on the lease and circumstances, options may include negotiating an agreed early termination with the landlord, known as a surrender, or exploring an assignment to a replacement tenant. Neither should be assumed to release you automatically from all liability.
Landlords receiving an apparently defective notice should also obtain advice before rejecting it. Mannai shows that an incorrect date does not necessarily make a notice invalid.
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