Serving a break notice under a lease has significant consequences for landlords and tenants, so it is unsurprising that notices are often contested. Solicitors deploy a range of arguments to support their client’s position.
The established rule is that break conditions must be strictly complied with. If the break date falls between rent payment days and rent is payable quarterly in advance, the tenant must pay the full quarter’s rent. This gives both parties certainty. If the break succeeds, the landlord only refunds sums attributable to the period after the break date if the lease expressly requires repayment.
In Sterling House Ltd v International Baccalaureate Organisation (UK) Ltd [2026] EWHC 2680 (BP), however, the tenant argued that the landlord was estopped from requiring payment of the full quarter’s rent. Annual rent was payable in advance on the usual quarter days and insurance rent on demand. The parties agreed that the break would fail if either sum remained outstanding on the break date. The tenant’s facilities manager twice asked the landlord’s managing agents for a demand for the quarter beginning 25 December 2025. In response to the second request, the agents issued an invoice calculated only to the break date, which the tenant paid. The tenant’s facilities manager said that he believed all sums due under the lease had been paid and had relied on the agents to invoice correctly. On the working day before the break date, the landlord also emailed and hand-delivered an insurance rent demand to the tenant’s registered office. The facilities manager was at the premises overseeing dilapidations works, while the accounts team was in Singapore. The insurance invoice was paid by bank transfer the day after the break date.
To establish estoppel, the tenant had to show a clear representation, detrimental reliance and that it would be unconscionable for the landlord to withdraw the representation. The court held that the managing agents’ invoice clearly represented what the landlord required before the premises were handed back, and the tenant relied on it when paying. The facilities manager had tried to establish the amount due, although he referred to rent rather than insurance charges. The last-minute insurance demand did not allow reasonable time for payment and the tenant paid without undue delay. The landlord was therefore estopped from relying on the shortfall in annual rent and the late payment of insurance rent. The break succeeded. It is not clear from the decision, but it seems that the ‘reasonable time’ issue is relevant to the estoppel argument, rather than being an implied term which applies generally to all payments due on demand.
In Sterling House, the landlord’s agents made a clear representation. What happens to an estoppel argument when the landlord is silent? In Avocet Industrial Estates LLP v Merol Ltd [2011] EWHC 3422 (Ch), payment of all sums due under the lease was a condition of the tenant’s break. Default interest on late payments accrued from the due date, whether demanded or not. The tenant had often paid rent late. The landlord had twice demanded, and the tenant had paid, default interest, but the landlord had not demanded default interest in relation to every late payment. After serving its break notice, the tenant and its solicitors repeatedly told the landlord that no sums remained outstanding. The landlord did not respond. The tenant delivered the keys on 16 March, the day before the break date. On 7 April, the landlord returned the keys and asserted that the break had failed.
The court held that the tenant was liable for undemanded default interest. Both parties could calculate whether interest was due and its amount: the tenant knew when it had paid, and could ascertain the relevant rate of 4% above National Westminster Bank base rate. Nothing in the lease required a demand before interest became payable. The judge accepted that the drafting created ‘something of a trap’, allowing the landlord to review five years of payments and calculate interest on every delay.
The tenant tried to rely on estoppel to break the lease despite not paying default interest. It had to show, first, that it mistakenly believed it had complied with the break conditions and, second, that the landlord knew both of that belief and of the mistake. The tenant pointed to receipt of an interest payment under the rent deposit deed, payable only while it was not in default, and argued that the two earlier default interest demands represented all interest then due. The judge found no express or implied representation that the tenant need not pay further default interest, or that the landlord would not enforce its right to it. The critical evidence indicated that the landlord did not identify the breach until after the break date. The landlord’s silence was therefore not a deliberate exploitation of the tenant’s mistake and did not create an estoppel by acquiescence. Unpaid interest of £130 meant that the break condition was not satisfied.
Avocet and similar cases have influenced modern drafting. A well-advised tenant should seek to limit any payment condition to annual or principal rent, rather than ‘all sums’ due under the lease. If other payments are included, Sterling House shows the value of imposing a deadline for demands, giving the tenant time to arrange payment of uncertain amounts. It also shows the need for solicitors to work as a team with their client’s other professional advisers well before the termination date. That teamwork may prevent an avoidable dispute.
Suzanne Gill is a partner at Wedlake Bell, London
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