Abrol v Kenny

Commercial premises — Tenant taking up occupation — Agreement for lease between landlord and tenant — Tenant paying £2,000 into joint account — Whether terms of new lease agreed between parties — Whether landlord entitled to retain money — First instance decision in tenant’s favour — Landlord’s appeal dismissedThe plaintiff owned premises at 165 Gravelly Lane, Erdington, Birmingham, comprising a shop with living accommodation above. In 1988 the premises were empty and the defendant was anxious to occupy them. In order to facilitate immediate occupation by the defendant, the plaintiff typed a written agreement which was executed as a deed. It stated that the agreement was legally binding and the rent would be £50 per week payable six months in advance. The tenancy was to commence on November 3 1988 and to terminate in 12 months. It specified that there would be rent reviews every three years, that it was a business tenancy, that the tenant would be responsible for maintenance, and that the landlord would arrange the insurance. It also stated: “Although this agreement is legally binding, it will be replaced by a lease made through the solicitors of both sides”. Further, that the “lessee is depositing £2,000 in a joint account … If the lessee decides to leave, then the lessor will not oppose the lessee withdrawing this £2,000. If, however, the lessee wishes to continue in the premises and would like a lease of say three, five, or seven years, then the lessee will be obliged to pass on the £2,000 to the lessor.” The defendant went into possession and paid the £2,000 into a joint account. After seven months his solicitors wrote to the plaintiff that he would like a lease of three to five years. The plaintiff instructed his solicitors who sent a draft lease which the tenant’s solicitors described as unacceptable. The negotiations continued, with the tenant remaining in possession and paying rent until he vacated in October 1993. The landlord claimed that the £2,000 be passed on to him. At first instance, the court found that the agreement “had been breached” and that the landlord should return the £2,000 to the tenant. The landlord appealed. Held The appeal was dismissed. 1. It was quite clear that the parties had never agreed the terms of the new lease. 2. The court had to start with the provision that although the agreement was legally binding, it would be replaced by a new lease. That provision was directed to a replacement of the 12-month lease. 3. Although it would appear that the rent review provisions in the agreement were in conflict with the initial term, it would be quite wrong to attribute to them the assumption that their solicitors would draw up a lease which would exactly reproduce the terms of the agreement. 4. Against the background, the court had to construe the crucial provision that if the lessee decided to leave, the lessor would not oppose him withdrawing the £2,000. 5. That obligation to pass on the money only arose if and when the lessee got his new lease. 6. With the wisdom of hindsight, the defendant had nearly four years after the first year before he vacated the premises, but on the true construction of the agreement, nevertheless that provision never came into effect. 7. The court could not accept that there had been a breach of contract as decided in the court below, but the correct decision had been reached notwithstanding, and the appeal dismissed. James Quirke (instructed by Moseley, Chapman & Skemp, of Sutton Coldfield) appeared for the appellant; Sara Williams (instructed by Moore Manton, of Sutton Coldfield) appeared for the respondent.