Property Law – Legal & General AssurancevExpeditors International

01 Feb 2007

Area(s) of Law :
Property Law
Court :
Source : EWCA Civ 7

Landlord and tenant

Break clause

A landlord R tenant of commercial premises under two leases- 10 yrs from January 2001- R had option to determine leases at end of December 2004- not less than 6 months notice required- exercise of option conditional upon usual conditions of R having paid all rent, complied with covenants and delivering vacant possession at date of expiry of the notice- notice served June 2003- negotiations between A and R- settlement whereby R to pay a sum of money to A for dilapidations (including a sum for notional loss of rent after expiry of the leases when A would carry out the work) –  in return A released R from all obligations under the leases in respect of condition of the premises- R further agreed to keep premises in no worse state than at visit of A’s surveyor (August 2004)- premises not vacated by end of December 2004 – A claimed lease not terminated as conditions for exercise of break clause (vacant possession) not complied with – J found it was an implied term of the settlement that A had waived compliance with the remaining conditions of the break clause- appeal:

Held: Appeal dismissed. (Lloyd LJ, dissenting) Whether on proper construction or by way of implication, it was a term of the settlement that the leases would terminate at the end of December 2004, whether or not vacant possession was given. There was no sensible basis on which R could agree to pay a sum in respect of notional rent after the termination of the leases, unless the leases in fact terminated. The intrinsic assumption was clearly that the right of possession was irrevocably set to expire on the agreed date, so that any consequences of failure to yield possession would lead to a right to claim damages for trespass but could not constitute a breach of the conditions of the break clause


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