Limited Partnerships and their personality

Limited partnership structures have become an increasingly common form of property investment vehicle over recent years and it is easy to forget that (unlike limited companies or limited liability partnerships) they are not legal personalities. A limited partnership is governed by the Limited Partnership Act 1907 and is essentially is a partnership between the “General Partner” and the “Limited Partners”.

The case of Vanquish Properties (UK) Limited Partnership -v- Brook Street (UK) Limited [2016] EWHC 1508 (Ch) provides a stark example of how a failure to appreciate the legal personality of a contracting party can have adverse consequences.  In this case a break notice served in respect of a lease was invalid because the wrong entity was referred to as landlord.

The case concerned premises on Fenchurch Street, which were originally let by the City Corporation to Brook Street. The lease contained a landlord’s right to break on 27 September 2016 on six months’ notice. The premises were to be redeveloped and the City Corporation granted an overriding lease to the developer, who was described in the lease as "Vanquish Properties (UK) Limited Partnership acting by its General Partner Vanquish Properties GP Limited". So, the developer became Brook Street’s direct landlord. As soon as the overriding lease was granted, Vanquish purported to exercise the landlord's right to break in the occupational lease and served the break notice on Brook Street.  The notice was served for and on behalf of “Vanquish Properties (UK) Limited Partnership, the landlord of the property.

The Court held that the break notice was incorrect because it was not legally possible to vest the overriding lease in the limited partnership.  Therefore the limited partnership could not be Brook Street's landlord.  The partnership had five partners and the Court could not establish which of them had been intended to hold the legal estate.  However the judge was prepared to accept that it was likely that it was intended that the legal title was vested in the general partner as the general partner was referred to in the definition of the parties to the overriding lease.  However the general partner was not named in the break notice.  Therefore the notice was defective.  So, the Court needed to consider whether the notice could be saved under the "reasonable recipient" test established in Mannai Investment Co Ltd -v- Eagle Star Life Assurance Co Ltd [1997].

Would a reasonable recipient of the notice reasonably believe that a reference in the notice to the limited partnership should have been a reference to the general partner?  The judge answered this question in the negative and decided that the reasonable recipient could have come to a number of reasonable alternative conclusions.  For example, the recipient might think that the notice was being served by some – not all – of the partners.  Indeed Brook Street did not even know that the overriding lease had been granted and might well have been confused on receipt of the notice.  This would equally apply to a reasonable recipient who did not know that the identity of their landlord had changed.

Please click below for further articles in the newsletter:

• Is service by email good service?
• Rentcharge remedies
• A restrictive covenant is not the best way to secure overage
• Vacant possession and failure to deliver it on the exercise of a break option
• Rights to light: Developer's conduct can prove costly
• Landlord wins the right to develop airspace above the building