Break clauses: the conditions for valid exercise of a break right must be complied with

In Friends Life Limited v Siemens Hearing Instruments Limited ([2014] EWCA Civ 382, CA (Eng)) S were tenants and the lease contained a break clause giving them the right to determine the lease before the end of the term on serving a notice exercising the right on the landlord. The break clause clause required the tenant’s break notice to be ‘be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954’ (in fact this section makes no reference to the service of any notice). The tenants served a break notice that complied with the requirements of the clause in every respect except that it was not expressed to be given under section 24(2) of the Landlord and Tenant Act 1954. The question was whether the notice was valid. The English Court of Appeal (Lewison LJ giving the main judgment) held that the notice was not valid; it had failed to comply with one of the conditions for its exercise.

Break clauses are a form of option. The conditions for the exercise of an option must be fully complied with; there is no concept of substantial compliance. In failing to be expressed in the manner required, the notice failed to comply with one of the conditions for its valid exercise.

‘Where an option prescribes substantive conditions that must be fulfilled by the promisee before the promisor’s obligations are triggered, those conditions must be completely fulfilled. Substantial fulfilment is not enough.’ ([27])

‘Here there was no compliance with the formal requirement of clause 19.2 that the notice be “expressed” in a particular way. There was quite simply no reference in the notice to section 24 (2) at all.’ ([65]).

Michael Lower

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