Marchmont Hold Developer to Ransom in Landmark Legal Win

Posted: 06.06.2017

Brook Street (UK) Limited was the tenant in this case, who occupied the ground floor of 108 Fenchurch Street in the City Of London. They occupied under a lease entered into in 2011 with the City of London Corporation for a term of ten years.

The lease contained a break clause that allowed the landlord to terminate the lease on 27th of September 2016, upon giving six months’ notice.

The Claimant, Vanquish Properties took an overriding lease of the premises from the City of London Corporation on 22nd of March 2016 and promptly served a break notice and a section 25 notice on the tenant. The new landlord was a Limited Partnership, which originally (in April 2011) had two partners. A further three partners joined shortly after the Partnership was formed in June of the same year.

The decision  

Marchmont, during advices to their Client, noted the inconsistency and disputed the validity of the break notice and the section 25 notice as it was disputed that Vanquish Properties (UK) Limited was not the correct landlord for the purposes of serving the break notice as the legal estate could not be vested in the name of the Partnership but rather had to be in the name of the partners.

The High Court considered the landlord’s application for a declaration that the break notice and section 25 was valid.

The Claimant’s application for a declaration was dismissed. It was held that the break notice and section 25 notice were invalid as the legal estate in land was not capable of being vested in the name of the Partnership.

As Ashley Miller at Marchmont confirms - "this set up an excellent set of circumstances  for negotiations to commence with the Landlord to agree the vacation of their site by our Client, resulting in a substantial surrender premium and smiles all round: at our end in any event!"

Further analysis

The Limited Partnerships Act 1907 (“the Act”) provides that land held by a partnership can be vested in no more than four partners. Should a partnership have more than four people named as trustees or grantees, the first four named will hold the estate as joint tenants, in trust for the partnership. In this case, it was not possible to determine who the “first four named” were in reference to documents filed in accordance with the Act. The lease could not, therefore, have been granted to the Claimant in this case, as it was not possible in law. This meant the Claimant was not entitled to serve the break notice (or the section 25 notice) on the tenant.

This case is a warning to both landlords and tenants when serving notices to determine. Both should note that it is always worth checking the number of members comprising the partnership to ensure compliance with the law.