Archive for April, 2012

Harsh but true

Tenants’ break clauses continue to be a regular feature of commercial leases but the conditions and hurdles imposed by landlords also continue to be raised.  Avocet Industrial Estates LLP v Merol Limited and another [2011] EWHC 3422 (Ch) found Mr Justice Morgan (as he then was) considering one such example.

The lease stated that a tenant’s break notice shall be of no effect if, inter alia, at the break date any payment under the lease due to have been paid on or before that date had not been paid.  Pursuant to the lease if any payment due was not paid by the date it was due, whether formally demanded or not, the tenant shall pay the landlord interest on the amount to and including the date of payment.

The tenant served a break notice.  The landlord searched its records for the preceding 5 years, identified every single late payment and then calculated interest due throughout that period.  It contended that non-payment of the interest meant the tenant had failed to operate the break clause even if the landlord had not previously demanded payment of the interest.

Mr Justice Morgan considered the fact that the landlord had failed to demand interest as and when it fell due and the law relating to estoppel.  He found as a fact that at the break date, the tenant did owe interest under the lease and as a result fell foul of the lease requirements.  He held the landlord was not estopped from relying on the non-payment and whilst he recognised the result to be a harsh one found the break notice to be of no effect.

If you wish to hear more about break clauses, why not contact Hatherleigh Training?