The Importance of Lease Registration

Another recent high court decision regarding effective service of a break notice highlights the importance of registration following the lawful assignment of a commercial lease.

In Sackville UK Property v Robertson Taylor Insurance Brokers Limited and Integro Insurance Brokers Limited [2018] EWHC 122 (Ch), the landlord rejected service of a break notice by the new tenant on the ground that the notice was invalid, as it had been served by a party who was merely a beneficial owner and not the tenant at the time the notice was served. 

On an assignment of a commercial lease, the existing tenant is generally required to obtain the consent of the landlord to assign (‘transfer’) the remainder of the term of the lease to a new party, known as the assignee. When a registered leasehold title is assigned, a transfer deed is executed by the parties and sent to land registry to enable the assignee to be registered as proprietor of the leasehold title following assignment.

On the facts of this case, the landlord had granted consent to the assignment of the lease. However, the assignee failed to register a change in the ownership of the leasehold title at Land Registry on the mistaken belief that the assignment was sufficient to transfer the remainder of the lease. By failing to register the transfer of the registered legal title, the assignment took effect in equity only and the legal estate did not vest in the assignee. 

The new tenant purported to serve a break notice in accordance with the terms of the lease.  It is always advisable to obtain legal advice when serving a break notice, as this is one of the most litigated clauses in commercial leases. 

In this case, the landlord rejected the notice as invalid because the tenant had failed to register themselves as legal proprietor, and the high court agreed with the landlord; a disposition of a registered estate does not operate at law until the disposition is completed by registration.

The break notice was therefore invalid and the lease continued. This was a costly mistake for the new tenant as they continue to be bound by the terms of the lease for the full five years remaining of the term. 

MORE INFORMATION 

If you are considering making an assignment of a lease or serving a break notice, please contact a member of our Commercial Property team for impartial legal advice. Call on 01708 229444 or email us using our contact form.This article was written by Keeley Miller, Senior Associate at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of April 2018.