A dispute over the implications of the terms of a lease of office and shop premises in Chelmsford, Essex, has moved to the Court of Appeal.
Tenant JIS (1974) Ltd is challenging a High Court decision in which Hart J rejected the company’s claim that it was entitled to operate a break clause of premises at 1 Legg Street, Chelmsford.
JIS became the tenant under a January 1993 lease, granted by Sun Alliance, the defendant landlord’s (MCP Investment Nominees I & II Ltd) predecessor in title, of the whole of the office building and ground-floor shop units.
But by an underlease of the same date, JIS leased the shop units back to Sun Alliance for the entire 25-year term of the lease less one day, to reflect the fact that JIS had no use for the units.
Clause 5 of the lease contained a tenant’s option to break at the end of the 15th year, conditional upon JIS giving up vacant possession of the premises; a condition that JIS sought to exercise.
MCP claimed that the break clause required the tenant to give up vacant possession of the whole of the premises, including the shop units, which JIS was unable to do because of the existence of the underlease.
In the Court of Appeal, Jonathan Brock QC, counsel for JIS, argued that “to give effect to the obvious intention of the parties, the obligation to give vacant possession of the demised premises should not include an obligation to give vacant possession of the units”.
Alternatively, he claimed that “in order to give business efficacy to the lease, terms should be implied to this effect”.
Arguing in support of the High Court ruling, Kim Lewison QC, counsel for MCP, said that if the tenant “broke the headlease, with the result that the leaseback and the occupational subleases also terminate, there is a real risk that the shop tenants will either quit or will apply to the court for a new tenancy under Part II of the Landlord and Tenant Act 1954, but at a lower rent than that which they were paying before the break”.
The hearing continues.
JIS (1974) Ltd v MCP Investment Nominees Ltd and another Court of Appeal (Kennedy, Buxton & Carnwath LJJ) 8 April 2003.
References: PLS News 8/4/03
