Breaking up is hard to do

Dave was thrilled when his firm won the pitch to act for multi-media group Mega UK.

The client was everything he had hoped for - progressive, prestigious and willing to pay well for quality advice.At an early briefing, Mega's chief executive Martha explained her plans to restructure the company.

She told Dave that its Internet operations would be transferred to a new entity, 'Mega Online,' and its traditional publishing business moved to provincial offices.

The 10-year lease on Mega's trendy West End office would be assigned to the new company.Dave and his partners completed the job in record time.

Mega's top brass were so pleased that they instructed Dave to handle the flotation of Mega Online on the London stock exchange.Within months, the dream became a nightmare.

Mega Online's shares plummeted to a fraction of their opening price.

The multi-million pound investment in the Internet showed no sign of making a profit.

At a tempestuous meeting, Martha persuaded the board to shut down Mega Online.Dave was told to exercise Mega's break clause on the West End lease.

To his horror, the freehold owner - a major property company - refused.

Its lawyers wrote that the break clause was specific to Mega UK, not the group as a whole.

Mega Online could not exercise it.

Several years' rent remained to be paid.Dave kept his cool and phoned Martha.

His firm had made a mistake, he explained, and should have advised her about the nature of break clause before he assigned the lease.

Any loss to Mega would be covered by his firm's professional indemnity insurance.

And it was possible that the landlord would take a commercial view and agree to a reassignment.As soon as the call ended, Dave fired off a letter to the Solicitors Indemnity Fund - and Martha prepared a letter of instruction to another firm of solicitors.X The SIF has received a number of property-related claims arising from intra-group transfers.

Solicitors should check which body corporate has the benefit of rights contained in leases and advise their clients whether they are transferable.X Don't forget to deal with first registration of transferred titles when necessary.

X For information on claims prevention, contact your claims handler at the Solicitors Indemnity Fund or the Risk Improvement Unit; tel: 0171 566 6000.