Property in dispute - March 2011

Landlord estopped from challenging tenant’s break notice

In MW Trustees Ltd and others v Telular Corporation [2011] EWHC 104, the High Court held that the landlord was estopped from challenging a tenant’s defective break notice.

The tenant had the right to terminate its lease on a specified break date being 1 March 2010 by serving six months’ notice on the landlord.  The lease stated that the notice had to be in writing and served by special delivery or by hand to the landlord’s registered office.  The freehold reversion was transferred to the claimant and the tenant was notified of the change of landlord.  The property was managed by managing agents appointed by the claimant. 

The tenant served a break notice on 10 August 2009 by special delivery on the claimant’s predecessor instead of the claimant itself.

The claimant’s predecessor informed the tenant on 13 August 2009 that the property had been transferred to the managing agent.  Clearly this was wrong as the managing agent was not the landlord.  In any case the tenant emailed the claimant attaching the original break notice and asking it to confirm the necessary steps to determine the lease.  The claimant replied and said that it had forwarded the tenant’s email to the managing agent who would deal with it.

The managing agent emailed the tenant on 17 August 2009 stating that the break notice was accepted and the tenant could terminate the lease.  The managing agent also asked the tenant to re-address and resend the notice to the claimant.  The tenant did this but the amended notice was either not sent or lost in the post.

The claimant then argued that the notice served on 10 August 2009 was ineffective because it was not addressed to, or served on, the claimant.  The claimant said that although it received the notice on 13 August 2009 service was ineffective because it was not addressed to the claimant and the service requirements in the lease did not permit service by email.  The claimant said that the managing agent’s email of 17 August 2009 only acknowledged receipt of the tenant’s email and notice and did not accept the validity of the notice.

The tenant conceded that the notice of 10 August 2009 was served on the wrong party and that the lease did not permit service by email.  However, it was the tenant’s position that despite these mistakes the managing agent accepted the notice on behalf of the claimant.

The High Court applied the principles in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19 and held that, a reasonable recipient would not have been misled as to the tenant’s intention to terminate the lease even though the notice was addressed to the wrong person.  The Court reviewed the lease and decided that although notice had to be given to the landlord, it did not need to be addressed to the landlord.  The High Court also held that despite the fact that the lease did not permit service by email, the landlord was estopped from challenging the validity of the notice.

Although the notice in this case was “saved” it is extremely important for tenants to comply with any requirements for the service of notices.  However, minor defects in notices will not necessarily invalidate the notice if the reasonable recipient, with knowledge of the factual and contextual background, would not be confused by the error.

What action should a landlord take if a tenant’s belongings are left at the premises at the end of a tenancy?

Usually a tenant must remove its chattels from the property at the end of the term.  This obligation is often an express term of the lease.  The lease may clarify what the landlord can do with any chattels that may be left on the property at the end of the term. But what happens in a situation where there is no express term in the lease, the lease has come to an end and chattels are left at the property? The chattels remain the tenant’s property and the landlord will become an “involuntary bailee”.  An involuntary bailee is a person who has, without their consent, found themselves in possession of goods belonging to another.

An involuntary bailee must not deliberately or recklessly damage or destroy the goods.  When returning goods to the owner through a third party the involuntary bailee must check that the third party has authority to receive the goods.

If the owner of the goods abandons them, the person who finds or takes possession of the goods may become the new owner and be free to deal with those goods as they see fit.  The difficulty is establishing whether or not the goods have been abandoned.

If the landlord can establish that the former tenant has abandoned the goods he can sell them.  Until that point the landlord must store the goods and ensure that they are not damaged or destroyed deliberately or recklessly. 

In order to determine abandonment, the landlord should serve a notice on the tenant or the true owner of the goods setting out where the goods are kept, when and where the sale will take place, if the goods are to be sold and stating that any sale and storage costs will be retained from the sale proceeds.  A schedule of goods should be attached to the notice.  The notice should also be attached to the premises in a place where it can be seen.

If the goods are collected the landlord should get written confirmation from the person taking the goods away confirming that they are the true owner of the goods.

If the landlord does not hear from the tenant after taking reasonable steps to notify him of the situation, he may assume that the goods have been abandoned and can dispose of them.  If the landlord decides to sell the goods, the sale should be at market value and the landlord should retain the proceeds of sale for a period which is appropriate to the amount of money involved. 

The landlord should document all action taken to contact the tenant in case evidence is required to defend a claim for damages or conversion and to establish a defence of abandonment.