The essential requirements of a valid agreement for lease are agreement as to the parties, property, lease term, rent and lease commencement date Harvey v Pratt [1965] 1 WLR 1025.
The High Court has dismissed an appeal concerning whether an agreement was an agreement for lease and void for uncertainty in Moqsud Ahmed Khan v Abdul Malik and another [2023] EWHC 2529 (Ch).
The defendant and his wife owned a property at Sunninghill, near Ascot, from which they ran a restaurant. The restaurant business was sold in September 2014 to Moitree Ltd. As part of the sale, the defendant intended to grant a lease of the property. However, while a draft lease for a 20-year term at an annual rent of £25,000 was drafted, and signed counterpart leases were exchanged, the formalities were not completed.
The claimants were subsequently persuaded to invest in the restaurant. At a meeting in August 2016, which the defendant attended, it was agreed the claimants would buy out the Moitree shareholders, the second claimant would refurbish the property and a new 20-year lease would be granted to a new entity. If the new lease was not granted the defendant would pay the second claimant for undertaking the works. The lease was not granted and the claimants sought damages of £92,000 from the defendant.
The judge found the claimants’ fundamental case on the agreement reached was correct. The new lease was to be either the existing lease with different names or a new lease on similar terms. As for its status, the judge decided it was not an agreement for lease but an agreement by the defendant to grant a lease in favour of a third party. Its commencement date could be ascertained by reasonable inference from the language used to be when the new company was set up.
The defendant appealed, arguing the judge was wrong because the agreement was uncertain as to the commencement date, the grantee’s identity, rent and other covenants. The High Court agreed that the agreement reached on 8 August 2016 was not an agreement for lease but an agreement for the defendant to offer a new lease to a new entity. The new entity did not exist in August 2016, it was not a party to the agreement reached and no obligation for it to take the lease was created. Consequently, Harvey did not apply. Even if it did, it was open to the judge to conclude that the lease would commence when the new entity was formed.
Louise Clark is a property law consultant and mediator
