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Exploring the decision of Gateway Assets Limited v CV Panels Limited (2018 SCLR 736, 2018 Hous LR 34) and the delivery of notices in commercial leases

In the case of Gateway Assets Limited v CV Panels Limited, a letter was sent by the tenant to exercise a break option. The lease commenced on 3rd December 2012 and under the terms of the lease, the tenant was entitled to terminate on the fifth anniversary, upon giving 6 months’ notice.

The tenant wrote to the landlord’s managing agents on 19th June 2017, this being less than six months before the fifth anniversary, intimating their wish to exercise the break option. The tenant’s decision had been discussed with the landlord prior to this point. The landlord contended that the notice was ineffective as it was too late, was not in proper form and was not sent to the correct recipient - it should have been sent to the landlord itself rather than their agent. The tenant then produced a copy of a previous letter sent in April 2017, being eight months before the anniversary, by ordinary post to the landlord’s managing agent. Both the landlord and their management agents stated they had never received such letter and the landlord raised an action for declarator that the break option has not been properly exercised.

The question to de determined by the court was whether the notice has ever been sent and if it had, was the tenant entitled to an evidential presumption that it had been received.  The main query was whether the notice was effective.

Lord Clark determined that the tenant’s letter of April 2017 had not been sent and even if it had been sent, had not been received. The presumption at law is that a letter sent should be presumed to have been received. The court held that the presumption would still operate but that it could be rebutted if evidence proved it had not been sent in the first place. For instance, how the recipient handles their mail. Lord Clark was satisfied with the evidence provided by the landlord’s agents on their mail procedures that the letter had not been received or else they would have known about it. The court did note the possibility of the letter being lost in the post, however, in this event, it would never have been received and as a result, deemed ineffective.

Lord Clark did however agree with the tenant’s submissions that construction of a notice is to be interpreted objectively from the perspective of a reasonable recipient taking into account the “contextual scene”.

This case reviews various points which are often disputed when serving notices in terms of leases and demonstrate the courts willingness to now look at the context of an agreement as opposed to just the literal wording of their terms. In any event, parties should ensure notices are served on time and in accordance with the terms of the lease in order to avoid disputes arising.

Commercial Lease Dispute Solicitors Glasgow, Scotland

For further information please contact our commercial litigation team Gordon Bell (Partner and Head of Litigation) or David Hutchison on 01413336750 or complete our online enquiry form.

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