The recent High Court ruling in Vanquish Properties (UK) Limited Partnership v Brook Street (UK) Limited [2016] EWHC 1508 (Ch) has provided real estate professionals and advisers with an important reminder of the legal requirements when limited partnerships are party to transactions.
The case involved a development property in London, let to Brook Street by the City Corporation (as freeholder) under a lease containing a landlord's break clause. In connection with the proposed development of the property, the developer (Vanquish Properties (UK) Limited Partnership, acting by its general partner) (Partnership) was granted an overriding lease so as to become the direct landlord of Brook Street. Solicitors acting for the Partnership then served a break notice on Brook Street - doing so on behalf of "Vanquish Properties (UK) Limited Partnership, the landlord under the lease".
The developer argued that the Partnership was Brook Street's landlord or, alternatively, that the developer's lease vested in the general partner and the mistake in the name of the party serving the notice would have been clear to a reasonable recipient using the Mannai principle (i.e. minor defects in unilateral contractual notices will not necessarily invalidate the notice if the reasonable recipient, with knowledge of the factual and contextual background, would not be perplexed by the error (Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19)).
The Court held that the overriding lease was not granted to the Partnership because this wasn't possible in law (an English limited partnership has no legal personality in its own right). Given that the Partnership had five partners in total, but only the general partner was named in the lease, it also was not possible to construe that four of the five partners held the lease pursuant to s.34 of the Law of Property Act 1925 (which specifies that where land is expressed to be conveyed to a number of persons in undivided shares, the document will operate as if it were to the first four named, as joint tenants in trust for the persons interested in the land).
The Court went on to hold that:
- The break notice was not given on behalf of the landlord (as it was expressed to be on behalf of the Partnership) as the lease required.
- That the break notice could not be saved by the Mannai principle because there were too many possible conclusions as to on whose behalf the notice could have been served.
The case highlights the importance of making sure contracting entities are correctly referred to in all legal documents and notices - particularly when drafting property documents which require legal title to vest in a entity with separate legal personality.
In short, when dealing with limited partnerships, remember:
- An English limited partnership does not have separate legal personality - it cannot contract on its own behalf. Note: Limited partnerships formed in other jurisdictions (e.g. Scotland or Jersey) may have separate legal personality.
- Documents should be entered into by the general partner (acting in its capacity as general partner of the limited partnership), although some property documents may require two trustees to hold the legal title for the purpose of overreaching beneficial interests.
- Documents should not be signed or entered into by limited partners (as this may remove their limited liability status).
