Nothing worthwhile is easy – getting notices right

Most parties to a lease will at some stage be required to issue, or be in receipt of, a notice. The most frequently issued notices are a notice to quit, a break notice and an irritancy (or termination) notice. The current economic climate brings an increased likelihood for tenants and landlords alike to serve these types of notices and a desire to challenge where possible. Failure to serve a valid notice can have significant consequences. A question commonly asked is – do I need a lawyer to assist with the preparation and issue of a notice? Three recent Scottish court decisions demonstrate why it might never be too early to get a lawyer involved. Contents of a notice Anyone with knowledge of the rules around issuing a notice in accordance with a lease will be aware of Lord Hoffman’s statement that, “if the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper” (Mannai Investment Co Ltd v Eagle Star Assurance Co Ltd [1997] AC 749; [1997] PLSCS 150). So far as the contents of a notice is concerned, while the courts have subsequently attempted to avoid an overly technical interpretation of notices, Lord Hoffman’s advice to a drafter still holds good. It is important to read the lease and then act in accordance with its instructions – however awkward. In addition, a drafter should also make sure (i) the contents of the notice is “sufficient to convey the necessary information to the recipient”; and (ii) the method of giving the notice is “in accordance with the contractual provisions that govern the sending of the notice” (Hoe International Ltd v Andersen and another [2017] CSIH 9). Three recent cases illustrate that, while it is possible to distil the key principles of drafting and sending a notice, circumstances out with the content of the notice are just as important and may have a bearing on its validity. What the courts had to say in the recent decisions Ventgrove Ltd v Kuehne+Nagel Ltd [2022] CSIH 40 The lease allowed the tenant to exercise a break option. The right to exercise the break came with conditions. First, that sufficient notice was given and secondly that £112,500 plus any VAT was paid to the landlord. The terms of the notice were not in issue and the tenant made payment of £112,500. The matter considered by the court was whether the tenant ought to have also paid VAT on the break payment to the landlord. At first instance, the tenant was successful in arguing that there was no VAT payable to the landlord and, accordingly, the break notice was effective. The landlord appealed the decision to the Inner House, where it was held that VAT ought to have been paid – and accordingly that the break notice was not effective. While the court considered the precise terms of the notice and technicalities of VAT in some detail, the case serves as a reminder that an apparently simple condition can give rise to a dispute and that it is essential to comply with the condition. Hingston, Murray and Sutherland v Craigellen Assets Ltd [2022] SC STO 35 This interesting case from Stornoway Sheriff Court relates to the lease for a solicitors’ office in Aberdeen. The tenant was a partnership, and the three partners were jointly and severally liable for the tenant’s obligations under the lease. The firm was sequestrated in 2016. One of the partners set up a new company (HLL), purchased the assets of the firm and traded from the premises. No steps were taken to formalise the new arrangements for the premises (either in writing or otherwise). In March 2019, HLL issued a notice to the landlord purporting to exercise the break option within the lease. The landlord argued the break clause in the lease entitled the partners to issue a break notice and that, as HLL was not the tenant, the purported break notice was of no effect. The court agreed. This case serves as a reminder that getting the fundamentals correct (such as who is the tenant and who is the landlord) in a notice is crucial. It also brings to mind a dispute which did not reach the court – because the prospects of successfully arguing that the notice was valid were poor. In that instance a notice was issued to a landlord who had disposed of the property some three months prior to the issue of the notice. The notice from the new landlord advising of the change had gone astray within the tenant’s organisation and the landlord had retained the services of the existing managing agent, which might otherwise have alerted those within the tenant’s organisation who were instructing the service of the notice at the relevant time. Fatally, no check of the land register was made before the drafter prepared the notice. The moral? It is worth leaving sufficient time and taking the opportunity to ascertain exactly who the relevant parties to the lease are. Lujo Properties v Gruve [2023] SC GLA 3 The final case concerns a pre-irritancy notice. The landlord issued a pre-irritancy warning notice to the tenant. The notice was returned to the landlord’s solicitors, delivery having failed, shortly after posting. The 14-week deadline for payment (this being during the Covid-related extension) passed and the landlord sent a notice irritating the lease. The final notice was received by the tenant. The court considered whether the landlord could irritate the lease as the pre-irritancy warning notice had not been received by the tenant (either via post or any other means). To reach a conclusion, the court scrutinised the legislation and terms of the lease and concluded that given the terms of the lease, the landlord was not entitled to terminate the lease unless the tenant had been in receipt of the notice. The wording of the lease placed an obligation on the landlord to “give” not just issue notice. Once again, this highlights the need to leave sufficient time and to check the terms of the lease before putting pen to paper to draft the notice. You can’t be too careful The drafting and sending of contractual notices is beset by pitfalls for the unwary (and, on occasion, the wary). These three cases serve to highlight that even if the notice is a model of clarity and timeously sent, problems may still arise. Nothing worth having comes easy. In all cases a close examination of the terms of the lease is essential and a business would be wise to leave sufficient time for checks and to consult a solicitor before any notice is issued. Claire Thornber is a partner and solicitor advocate and Patrick Campbell Corcoran is an associate in the commercial disputes team at Addleshaw Goddard