Recent case law has shown the importance of ensuring registration of an assignment of a commercial lease and the impact failing to register has on break clauses.
A Break clause is a clause in a commercial lease which gives the tenant a right to end the lease early and notice must be given in a certain amount of time, as detailed in the individual lease. Such clauses are becoming more common, with prospective tenants taking a more cautious approach.
The recent case of Sackville UK Property Select v Robertson Taylor Insurance Brokers & Integro Insurance Brokers has shown the importance of registering an assignment of a lease at the Land Registry and the affect of failure to register has on the exercise of break clauses.
In the case, a lease was granted for a term of 10 years from 14 March 2013 which enabled the tenant to determine it on 14 March 2018 by giving not less than nine months’ prior written notice to the landlord.
The current tenant, Integro, had taken an assignment of the lease on 29 March 2017 from the original tenant, Robertson, but did not apply for registration of the assignment until shortly before 7 July 2017 and Integro served a notice purporting to exercise the option to determine on 2 May 2017. The landlord then argued that this break notice was invalid.
It was decided that on the date that the notice was served, Robertson was still the registered proprietor of the leasehold title, meaning that they were still the legal owner of the lease and was therefore the only person able to serve the break notice. The notice served by Integro was there found to be invalid, as they were only an equitable assignee of the leasehold title. This therefore meant that the lease had to continue until the contractual termination date in 2023.
This case not only highlights the importance of applying to register an assignment of a lease as soon as possible, it also highlights the importance of ensuring that break clauses and the amount of notice needed to be served, are taken into account when considering assigning a lease.
If you are considering assigning a lease or looking to take on an existing lease, please contact our specialist Commercial Property team on 01792 648111 or mail@johnmorse.co.uk
