We have two items to post on breaks.

  • The first is the surprising news that M&S have been given leave to appeal to the Supreme Court over the issue of the refund of the rent they had paid their landlord when they exercised a break. We will post again when there is news. We have a number of posts on apportioning and refunds of rent that you can read here.
  • The second is The Dan’s Bangers case (Sirhowy Investments Ltd v Henderson & Anor) – involving a second hand car dealer’s site which highlighted the continuing trend in lease break clause cases where compliance with the pre-conditions to a break are required to be strictly complied with for the break to be effective.
     

How did this Break Clause dispute come about?

The car dealership had been trading for some time and during a previous lease term it had obtained planning permission subject to a condition for the approval of its transporters turning circle. By the time the relevant lease was granted the tenant had negotiated the inclusion of a break clause in the event it was prevented from using the site for its permitted use, such break conditional upon the payment of rent and performance of lease covenants. After four years the local authority finally served a breach of condition notice and the tenant tried to exercise the break clause.

What did the Court decide?

The High Court was generous to the Tenant and decided that since the net effect of the local authority’s planning action was that the tenant was required to cease the permitted use that meant that they could serve the break notice.

Despite this the tenant did not successfully break the lease. The landlord alleged numerous breaches of covenant but the court restated that breaches that were “spent” were of no effect when considering compliance at the break date. This particular break clause required full lease compliance at the break date and ultimately the tenant was found to have failed to keep the fencing in good and substantial repair by merely patch repairing the fencing and it should have ensured the repair was ‘consistent with what already existed’.

Practical Pointers.

Landlords do not have to assist tenants in working out whether or not their lease break right has, or will, be validly exercised if they do certain works and this is an area which remains fraught with danger for tenants trying to determine commercial leases. Landlords can use this to keep tenants on the hook. Those advising occupiers might want to review our earlier posting “risks to tenants when serving break notices” here.