Dunelm Mill, which opened its doors as anchor tenant of a new Oxford retail park last August, has lost a High Court claim that it is not yet due to start paying rent.
Mann J granted Kingerlee Holdings, landlord of the Meadowside Retail Park, Lamarsh Road, Oxford, summary judgment on its claim for specific performance of Dunelm’s obligation to take the lease of Unit C and begin paying rent, initially at a peppercorn rate under the agreement.
The judge ruled that practical completion took place on 10 July last year, when certain planning conditions were satisfied, and that, under the agreement, Dunelm would be due to start paying full rent 568 days after that date.
The retailer had claimed that it was not yet not obliged to take the lease because the landlord has not served a valid notice which is required to trigger the obligation to complete.
It claimed that the agreement required notice of an inspection, and of the intention to issue a practical completion certificate, to be given by the landlord’s agent to the tenant, but that this was not complied with. It argued that this meant that no valid practical completion certificate had been given and that therefore there is no practical completion date, as defined by the agreement.
Since the lease completion date is 10 days after the practical completion date, it claimed that that date had also not yet occurred.
Alternatively, it argued that the rent commencement date should be delayed further, as a result of the need to seek retrospective planning permission after builders erected a 12m-high advertising “totem” on the access road to the development, rather than an 8m-high one. Retrospective consent for the totem was only secured on 16 August 2012.
Rejecting the first ground, the judge said that Dunelm’s argument would have the logical consequence of invalidating the practical completion certificate for the purposes of the building contract, which he said would be “a most surprising conclusion”.
He said: “ If the defendant is right, there is no valid practical completion certificate under the building contract. Further, it would mean that the tenant could have held up the issue of such a practical completion certificate, which would be almost as surprising. All this would certainly be likely to surprise the builder, and I think it unlikely that the parties to the agreement intended such surprises.
“In the circumstances I consider that the tenant’s resistance to specific performance based on the failure to give it an opportunity to participate in the practical completion certificate mechanism fails.”
He added that, if Dunelm claims to have been disadvantaged in a real way, then it may make a complaint under the agreement that the practical completion certificate should not have been issued, and an independent expert can adjudicate on the point.
Rejecting the totem point, he said that there was nothing in the evidence which showed that the existence of the contravening sign meant that Dunelm’s opening of the premises for trade was unlawful.
He said: “This totem was not on the demised premises. It was on the landlord’s retained land. Its over-tall existence there in no way rendered the tenant’s trading unlawful. Nor is there any basis for saying that the existence of the sign somehow exposed his client to the risk of enforcement action. I do not see how that is conceptually possible.”
“I find that the erection of the non-compliant totem, and the delay in getting permission for it until August, do not operate so as to bring about a postponement of the rent commencement date.”
Kingerlee Holdings Ltd v Dunelm (Soft Furnishings) Ltd Chancery (Mann J) 21 January 2013
Karen Shuman (instructed by Jones Day) for the Claimant
Timothy Leader (instructed by Spearing Waite) for the Defendant
