All is not what it Siemens: a controversial break case

Any commercial landlord or tenant will appreciate that a lease can be a highly valuable asset or a significant liability, depending upon both particular business requirements and the state of the real-estate market. In recent years, struggling tenants have sought to exercise lease break options to extricate themselves from costly and lengthy rental responsibilities, while landlords have endeavoured to resist or frustrate break attempts so as to preserve income streams and to maintain market and investment values. The sums and business strategies at stake have given rise to much litigation on the principles and practicalities of exercising lease breaks, and Walker Morris has reported on the various key decisions. The High Court’s latest decision, in the case of Siemens Hearing Instruments Ltd v Friends Life Ltd is important, as it seemingly flies in the face of earlier authority. An understanding of the facts and judgment will be of interest not only to those seeking to rely on or resist break notices, but also to those who draft break clauses in the first place.

The break clause in this 1997 lease required a written break notice to be served whose ‘notice must be expressed to be given under section 24(2) of the Landlord and Tenant Act 1954’. (The reason that this wording had been included was because, at the time, the law was unresolved as to whether a tenant could serve a break notice as an immediate precursor to serving a request, under section 26 of the Landlord and Tenant Act 1954 (LTA 1954) for a renewal lease, thereby negotiating more favourable terms for itself.) In September last year, the tenant (Siemens) served a notice indicating its intention to break the lease early, but the notice did not state that it was given under section 24(2) of LTA 1954. The landlord (Friends) did not therefore accept the break as valid, and the tenant issued proceedings in the High Court to determine the issue…

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