Industrial premises — 25-year lease — 10-year break option — Whether option validly exercised — Lease to run from August 1981 — Lease itself granted January 1982 — High Court holding that break clause properly construed meant a date measured from the term date rather than execution date — Tenant had given notice out of time — Judgment for landlord
A lease of Unit 1, Gastons Wood, Basingstoke, was granted on January 6 1982 for a term of 25 years and expressed to run from August 28 1981 (the date of the agreement for the lease). It was made between the plaintiff tenant, the UK arm of a multinational concern, and the then landlords (“ESN”). The lease provided for five-yearly rent reviews and by clause 4(9) and there was a tenant’s option to determine at the end of the 10th year.
In June 1989 ESN sold their interest in the property to the present defendant landlords, who became the reversioners. By 1990 the tenant’s requirements had changed and they considered exercising the break clause. They believed that the termination date for any notice was August 28 1991 (ie 10 years from the date from which the duration of the term was calculated). Therefore, the necessary six-months notice would have to be given in February 1991. The tenant felt that was too early and the landlord proposed that the break date be put back two years and stated that the vital termination date was January 6 1992 (ie 10 years from the execution of the lease). It followed that the notice need not be given until early July. The tenants gave notice on June 25 1991, but a dispute arose as to the date on which notice to terminate the lease had to be given and whether the option to renew required there to be no subsisting breach of covenant at the termination date.
Held The notice of termination was ineffective.
1. Where the length of the estate actually granted or enjoyed was in issue, it was to that which the court had to look and it could only be ascertained by reference to the execution date.
2. If the provision in the lease was one which on its true construction related to the measurement of time or the fixing of a date or obligation (not tied in with the actual continued existence of the estate at the relevant date) it was generally proper to look at the term date.
3. The parties to a lease might fix obligations by relating whatever date they chose, whether inside or outside the period of the duration of the estate.
4. In the present case, most of the terms in the lease made sense if the term for all purposes was a period calculated from the August 1981 term date and not from the execution date. There was nothing in the words of the lease suggesting that the break clause should contain a different meaning from the other clauses. There was nothing in the break clause which required a reference to be to the estate actually created and enjoyed as opposed to measurement of time.
5. Accordingly, the correct date for the notice was the earlier date of August 1981 and the notice actually given was not for the right date.
6. Further, there was a proviso in the break clause that it was subject to a condition precedent that all covenants should be observed and performed. There was no doubt on the facts that there was no effective break since the tenants were clearly in breach of the repairing covenant.
Nicholas Dowding (instructed by Herbert Smith) appeared for the landlords; Geoffrey Zelin (instructed by Lamb Brooks, of Basingstoke) appeared for the tenant
