Can a landlord challenge a break option after issuing the wrong invoice?

The facts behind the dispute

To exercise a conditional break option successfully, a tenant must comply strictly with every condition. This is fraught with danger and there are plenty of cases showing where tenants have fallen short. This week the case of Sterling House Limited v International Baccalaureate Organisation (UK) Limited shows that there are also risks for the landlord.

The court held that the landlord was estopped from denying that the tenant had satisfied the condition to pay monies due under the lease, because the landlord's agent had sent an invoice for less than was actually required.

The judgment is short, having been decided on the papers, so the facts and reasoning are less detailed than they might have been. However, it is clear that the tenant paid rent quarterly in advance and, to exercise the break option, was required to pay all arrears of rent, insurance rent and service charge by the break date of 23 February 2026 (the “Break Date”), which happened to be a Monday.

It is important to note that where rent is payable in advance, most break options which require arrears of principal rent to be paid mean the full quarter’s rent, even if the break date falls part way through the quarter. This lease was no exception.

What happened before the Break Date?

On 6 February, the tenant emailed the landlord’s agents, Knight Frank, to say that they had not received invoices for the rent and service charge which they were required to pay before the Break Date. They asked that the invoices be sent to them as soon as possible. A further chaser was sent on 10 February asking for “a copy of our rental invoice for the period 25.12.25 to 24.3.26… asap so that we can arrange payment this week”.

Knight Frank sent an invoice by email the same day, just for the rent and stated to be for the period from 22 December 2025 to 23 February 2026. The tenant arranged payment, of only the sum demanded, on 13 February. It believed the invoice was correct and that it had therefore made all payments required under the lease to exercise the break.

At 3pm on the Friday before the Break Date, the landlord hand-delivered to the tenant’s registered office an invoice for insurance rent of £2,500 (for the period from 25 December 2025 to 23 February 2026). The landlord had earlier that day also emailed the invoice to the tenant’s email address in Singapore (which service the parties agreed was invalid).

The tenant’s representative, Mr Jones, was not at the registered office that day, nor on the Break Date, as he was at the premises supervising last minute dilapidations work. The Singapore office forwarded the invalidly served invoice to Mr Jones on the morning of the Break Date but he did not see it until the morning of 24 February.

At 11.12am that day he asked Singapore to make payment as a matter of urgency. However, due to the time difference its office was closed and payment was not sent until 8.15am (UK time) on 25 February. It would have taken between minutes and a couple of hours to arrive at the recipient bank account.

Why did the court find for the tenant?

The landlord sought a declaration that the break was ineffective.

The court accepted the tenant’s argument that the invoice sent by Knight Frank was a clear representation as to what the landlord wanted to be paid before handover of the premises. The tenant reasonably relied on this. Although the tenant had not mentioned insurance rent to the landlord, from the context of its emails it was wanting to know how much was due to be paid in order to conduct that handover and bring the lease to an end.

Therefore, it was unconscionable for the landlord to try to revoke the representation. As a result, the landlord was estopped from arguing that the tenant was required to pay both the insurance rent and the remainder of the full quarter’s rent on or before the Break Date.

Even if the insurance rent was not covered by the estoppel, the judge agreed with the tenant that there is no default unless and until the payer has had a reasonable opportunity to implement whatever reasonable mechanics of payment are needed. Here, Mr Jones had made arrangements to pay the insurance rent at the earliest opportunity, once he was aware of the invoice.

What are the key lessons for landlords and tenants?

This case is a reminder that where rent is payable in advance, a break option will usually require the full quarter’s rent for the period including the break date to be paid.

It is therefore essential that any invoice sent to the tenant accurately reflects what is to be paid. If there is a mistake, it should be rectified as soon as possible, giving the tenant enough time to pay the amount in question before the break date.

Landlords should be aware that inaccurate or incomplete information provided to a tenant may prevent them from later relying on a failure to pay. Equally, tenants should continue to seek clarity on all sums due well in advance of a break date and retain a clear written record of those enquiries.

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