Could the Judgement on a Recent Property Dispute Case Affect My Partnership Tenancy?
A 2022 High Court decision has highlighted the importance of ensuring that partnership tenancies are properly managed, to avoid unexpected problems arising down the line.
Partnership Tenancy Dispute - A Matter of Three Siblings
The High Court has recently considered the matter of Procter v Procter and others [2022] EWHC 1202, which concerned a dispute between three siblings - Suzie, Philip and Jamie Procter. An aspect of the dispute related to a periodic agricultural tenancy, which was held by the three siblings, on trust for a partnership which had previously included all of them, but from which Suzie had retired as a partner some time previously.
Suzie had, as one of the joint tenants of that tenancy, unilaterally served a notice to quit, in breach of her fiduciary duties as a trustee of the tenancy (ie she had failed to act in the best interests of the partnership). The question arose as to whether that notice had adequately terminated the tenancy, and what remedies may be available to Philip and Jamie if it had done so.
Termination of the Tenancy
HH Judge Davis-White QC held that a single joint tenant could validly terminate a periodic tenancy without the involvement of their co-tenant/s. The point was made that a notice to quit under a periodic tenancy should be distinguished from the service of a break notice, surrender of the term, exercise of an option to renew or to apply for relief from forfeiture - each of which would require all joint tenants to act unanimously in order for the notice to be valid. This is because a periodic tenancy requires all tenants' consent to continue - as opposed to a lease for a term, which requires all tenants' consent to terminate pursuant to an appropriate term in the lease.
Since a validly served notice to quit cannot be withdrawn following its service, the court held that the periodic tenancy had been terminated by Suzie's actions. However, in this case, due to Suzie having breached her fiduciary duties in serving the notice (and the landlord being aware of this), the court was able to make an order for rescission of the notice, in order to undo its effect and to allow the periodic tenancy to continue.
Takeaways for Partnerships
The outcome in the Procters' matter, as is so often the case in any litigation, turns on its own specific facts. However, there are a number of useful steps which any partnership can take, to help the partners avoid becoming involved in costly - and stressful - legal proceedings due to disputes around property.
- Regularly undertake a property portfolio audit, so that all partners understand which property the partnership benefits from, on what basis, and any changes which may need to be made to reflect current needs.
- Promptly update legal titles whenever there are changes in the partnership, so that only current partners are named as the legal proprietors.
- Ensure that all tenancies, leases and other occupation arrangements (whether the partnership is the landlord or tenant) are agreed clearly in writing, that the partners fully understand the terms of those documents, and that relevant dates (such as termination dates and notice periods) are properly diarised and followed up so that new documents can be completed as necessary.
- Require all partners to sign an up to date partnership deed, to govern the duties and relationships between the individual partners.