Option to determine lease prematurely — Whether tenant validly exercising break clause — Whether landlord estopped from denying validity — High court holding that break clause to be strictly construed — Inadequate notice given — Invalid exercise — Judgement for landlord
The plaintiff landlord was a subsidiary of A&J Mucklow Group plc, a property-owning group with about 60 trading estates comprising 6m sq ft of industrial or warehousing accommodation. Unit C, Saltley Trading Estate, Birmingham, was let by the landlord to Metro-Cammell Weymann Ltd (“the tenant”) by a lease dated March 23 1989 for a period of six years from June 24 1988. The lease contained a break clause in clause 6, which made it a condition for the exercise of the option that the tenant was to serve on the landlord a notice in writing to be given “not less than three months” before the expiration of the third year of the term, ie not less than three months before June 24 1991.
By a letter dated September 20 1989 the tenant wrote to the landlord “to confirm that we will be exercising the rights to ‘break’ the lease at the earliest opportunity in line with the term of the agreement that we have with you. Perhaps you would let me know the timescale for this.” The letter was sent to the leasing manager of the parent company in the group. A dispute arose whether the break clause had been validly exercised by that letter; and if not whether the landlord was estopped from denying that it had been validly exercised.
Held Judgement for the landlord.
1. A break clause such as clause 6 was an option granted by the landlord to the tenant, enabling the tenant prematurely to end the term granted by the lease. Exact compliance with the terms of an option was required by the courts: see United Scientific Holdings Ltd v Burnley Borough Council (1977) 243 EG 43 & 127.
2. Clause 6 strictly construed as it must be enabled notice to be given at any time between the date of the lease and March 24 1991. The only notice which achieved a premature determination of the term was a notice of desire to determine the term “at the expiration of the third year”. No other notice achieved that result because no other notice would be in exact compliance with the requirements of clause 6.
3. The notice must purport to be a present exercise of the option as distinct from a future exercise of it, ie in this case it must express the tenant’s desire to achieve the end result at the expiration of the third year as distinct from expressing a desire some time in the future to bring about that result: see J Carradine Properties Ltd v Aslam [1976] 1 WLR 442; Page v Mallow Investments Ltd (1974) 29 P&CR 168.
4. In the present case the notice was not a notice to the landlord. It did not make clear to the reasonable recipient that it was a notice presently exercising the option rather than a request for information or a notice warning of a future exercise of the option. Accordingly, there was no valid exercise of the option.
5. Moreover, the landlord had not behaved in such a way that it was estopped from denying that the lease was determined on June 24 1991. It had not made any representation to the tenant on which it could base a defence; nor was there any implied representation by reason of the landlord’s silence. Both parties were large commercial organisations with well-qualified experienced staff and with access to competent experienced lawyers.
Jonathan Brock (instructed by Slaughter & May) appeared for the landlord; Paul Dickens (instructed by Ashurst Morris Crisp) appeared for the tenant.
