Sackville UK Property Select v Robertson Taylor Insurance Brokers & Integro Insurance Brokers highlights why break clauses are so important and why special care needs to be taken when exercising them. It’s also a reminder of the consequences of getting it wrong.

In 2013, Sackville (the landlord) granted Robertson a 10-year lease for a commercial property at an annual rent of circa £220,000. The lease was registered at the Land Registry under Robertson’s name and contained a break clause, which, if successfully exercised, would enable the lease to be terminated in March 2018 (five years early).

Integro Insurance Brokers acquired Robertson, and a license was granted to assign it the lease. Integro had to register the assignment of the lease at the Land Registry within 10 business days – but failed to do so.

On 2nd May, and before it’d been registered as the proprietor of the lease (which wasn’t until July 2017), Integro served a break notice on the landlord. The landlord protested that the break notice was invalid – Integro was not yet the tenant, it was simply the beneficial owner, and so any break notice had to be issued by Robertson.

According to Section 27(1) of the Land Registration Act 2002, the disposition of a registered estate doesn’t operate in law until completed by registration. This can take some time, creating a ‘registration gap’. In this case, a court confirmed that, until Integro was registered, it didn’t have legal title to the lease. The legal title remained with Robertson, who held the lease on trust for Integro. So, Robertson should’ve served the break notice.

As a result, the lease had to would continue until the contractual termination date – in 2023.

This was a very expensive mistake. All commercial tenants should check – and be mindful of – any ‘registration gap’ before attempting to exercise a break clause. Checking the registered title, with careful consideration, is key.