A reminder that serving notices isn’t always straightforward
Legal Development 08 November 2022 08 November 2022
UK & Europe
UK Real Estate Insights
The Court of Appeal has decided that where a notice fails to comply with a contractual or statutory condition – in this case, that notice must be given to the tenant – it is invalid, even though it was actually received by the correct recipient. The decision could be seen as harsh on the landlord who was unaware his tenant had assigned the tenancy just three days before. So, what lessons can we learn from this decision?
Mr Thomas was a tenant under an oral tenancy governed by the Agricultural Holdings Act 1986 (“AHA”) of a farm in Pentre Canol, Dyffryn Ardudwy. The tenancy contained no restrictions on assignment.
- On 30 October 2019, Mr Thomas incorporated a new company. He was sole shareholder, director and secretary and the registered office was his home address.
- On 1 November 2019, the tenancy was lawfully assigned by Mr Thomas to his new company. He didn’t tell his landlord, nor did he have to.
- On 4 November 2019, the landlord unaware of the assignment, served a notice to quit. The notice was addressed to Mr Thomas and delivered by hand to his home.
Lower court’s Decision
Under the AHA a notice to quit must be given to the tenant. At first instance (HHJ Jarman QC) and on first appeal (Zacaroli J), the courts relied on the principles laid down by Mannai Investment Co Ltd v Eagle Star Assurance Co [1997 AC 749] (“Mannai”) to find the notice valid. Zacaroli said in the High Court:
“the test under Mannai is whether, in the context in which the Notice was given, the reasonable recipient would have understood it to have been addressed to the Company as tenant under the Lease.”
He concluded that “a reasonable recipient would have no doubt that the Notice was intended to convey an intention to require the person who was in fact the tenant of the Lease to deliver up possession of the Land. Since the reasonable recipient would have known that the Company was, in fact, the tenant under the Lease, he would therefore have understood the Notice to be addressed to the Company.”
The Court was happy to correct the flaw in the notice on this basis and decided the notice was valid even though addressed to the former tenant. The tenant appealed.
Court of Appeal Decision
The Court of Appeal allowed the appeal saying that before the wider circumstances could be considered, you must determine whether the notice complied with the condition under the AHA to give notice to the tenant. If this condition is not satisfied, the Mannai test cannot step in to save the notice. Some mistakes are outside of the scope of Mannai and this case was such an example.Lewison J, giving leading judgment, distinguished between a case in which “the wrong language used to identify the right person: it is a case of the right language used to identify the wrong person.” A notice addressed to X and received by X cannot be construed as being a notice given to Y, even if X knows that Y would have been the correct recipient. Lewison J made clear to distinguish between what the landlord actually did and what it would have done with better knowledge (i.e. of the assignment to the company). It was not legally relevant that the landlord would have served on the company had he known, because in fact, he did not.
On first blush you might say that the decision appears to be harsh on the landlord who fell into a trap created (intentionally or unintentionally) by the tenant. Had the notice been served just 4 days prior, before the assignment took place, it would have been valid.
What does this mean in practice?
The decision emphasises the dangers associated with service of contractual notices and how strictly the court will interpret the need to comply with formal requirements. You might ask what the landlord could have done differently in the circumstances? With the benefit of hindsight, where a tenancy which allows the tenant to assign without restriction or notification, some additional investigative steps could have been taken before a notice is served. Alternatively, the landlord could have drafted the notice addressed simply to “the tenant” or not named the tenant at all, rather than referring specifically to Mr Thomas.
The decision stresses the importance of putting in place a written tenancy with clear obligations on the parties. Even if no consent is required to assign the tenancy, the parties should be under an obligation to notify the other and indemnify them for any losses arising out of a failure to do so. If you are considering giving notice, be aware that a failure to comply with substantive conditions will be fatal and no consideration of the wider circumstances shall be permitted.
Court of Appeal Decision