MacRoberts Real Estate Law e-update 06/02/08

HAS YOUR LANDLORD NOTICED THAT HE DOESN’T NEED TO TAKE NOTICE OF YOUR NOTICE?

Provisions in leases (and contracts generally) relating to the service of notices have often come to be overlooked as being standard and uniform “boiler plate” clauses and, as such, of limited interest. Regrettably for many tenants and landlords the importance of adhering to the precise terms of these provisions only becomes clear when it is too late.

The recent case of Ben Cleuch Estates v. Scottish Enterprise [2006] CSOH 35, [2008] CSIH 1 CA38/05 highlights some of the issues which arise in this area. The Ben Cleuch case centred around the issue of whether a lease option notice had been validly served by a tenant (Scottish Enterprise) on its landlord (Ben Cleuch). The notice had been addressed to Bonnytoun (Ben Cleuch’s parent company) and not Ben Cleuch. As Ben Cleuch and Bonnytoun had the same registered office and
the same director, however, the notice to quit was in fact received by the relevant party. Nevertheless, the court at first instance decided that although the landlord had in fact received the break notice, addressing a notice to Bonnytoun could not result in effective and valid service on Ben Cleuch.

At appeal Scottish Enterprise as tenants, successfully had this decision overturned. This was on the basis that the identity of the landlord had been misrepresented to them by Ben Cleuch on rent invoices (the invoices were sent out in the name of Bonnytoun) and because they relied on the validity of the rent invoices (which a reasonable tenant would be entitled to do). Ben Cleuch had therefore personally barred itself from maintaining that the facts were otherwise. It followed that Ben Cleuch was bound by the break notice and Scottish Enterprise were deemed to have successfully exercised their break option.

The appeal, however, turns purely on the facts and circumstances of this case. Had the facts been altered slightly and the court deemed it prudent for Scottish Enterprise and their lawyers to carry out further investigations into the identity of the landlord, the outcome could have been different. The tenant may have found itself locked into its lease for a considerable length of time.

Clearly then the serving of notices is of considerable practical importance. To ensure that a notice is effective, tenants and practitioners alike must carefully check (and double check) its terms, paying particular attention to the notice provisions in the lease.

Following on from the lessons learned in the Ben Cleuch case, the identity of the then current landlord should also be carefully confirmed (landlords can sell their interest and frequently can and do change). The identity of the landlord can further be shrouded in mystery by landlord’s managing agents’ rent invoices etc.

Frustratingly, there are many other pitfalls for the unwary tenant or landlord when it comes to serving notices. Given the often significant consequences of getting it wrong (particularly at rent reviews and break option dates) it is always best to carry out the necessary checks and be safe (and not sorry later).

If you require any further information please contact Gordon Thomson or Laurence Fraser on 0141 332 9988

© MacRoberts 2008