Tenants must note High Court ruling
A High Court ruling on breaking a lease on a commercial property could have implications for businesses across Shropshire, a county lawyer says.
The details of a ruling made before Christmas about enforcement of break clauses were made public last week, and Katie Gray, a solicitor and head of the business services department at PCB Solicitors in Shrewsbury, says it shows that companies should know where they stand before attempting to leave a premises.
Following the Avocet Industrial Estates LLP versus Merol High Court case, she said: “The tenant has invoked a ‘break clause’ in their contract with their commercial landlord and had served the notice correctly and within the terms of their contract.
“They had also paid the rent due, but had not paid a negligible amount of interest based on late payment of the rent, and the landlord had not issued any demand for this.
“Even so, the landlord has refused to accept the ending of the lease and the High Court upheld their decision because the tenant had not complied with all of their obligations, forcing the tenant to remain I n the property for the remainder of the lease term."
A break clause is common in leases, to allow tenants to legally end the lease early on a set date. It needs to be specifically worded and inserted into a lease if it is not already present, and allows an early exit from long leases.
Katie added: "We all know that business needs change over time. It may be that the commercial premises are no longer fit for purpose, are too large, too small, too expensive, or simply in the wrong location for a business, sometimes a number of years after a contract has been entered into.
“Leases all differ, however most follow the format of a tenant being required to give the landlord notice to end the lease on a set date.
“Based on the High Court ruling, it’s now absolutely imperative that commercial tenants comply with every single obligation of the lease prior to the lease date. Without doing this – and this could be something as simple as serving the notice one day late – the tenant runs a very real risk of the landlord refusing to allow them to break the lease."