Latest News - Commercial

A recent case concerning a lease over a property in Manchester illustrates yet again the importance of making sure that any matters under negotiation which are crucial are agreed in writing and unequivocal.

The problem occurred when a property was ‘split’ between a man (strictly his company) and his sister-in-law’s company as part of the break-up of a family company. The man’s company had a 15-year lease over the building and his sister-in-law’s company became the landlord. The lease contained a three-month break clause. The upper floors of the building were used as offices and the ground floor for the trading activities of the man’s company. He assumed that the lease would remain with his company to be renewed ad infinitum and that the break clause would not be enforced.

All went well until the landlord decided to redevelop the property and gave notice to the tenant company under the break clause that it would require possession for its own purposes. The tenant opposed the application, claiming that the landlord was ‘estopped’ (prevented by its earlier representations, on which the tenant had relied to its detriment) from claiming possession. The tenant also claimed that the transfer of the property should be rectified by making the break clause applicable only to the upper floors of the building.

The court considered that there had been no specific representation made by the landlord regarding the break clause, nor was there any implied representation. The tenant’s claims were therefore rejected.

This dispute could have been avoided had the original documentation been appropriately drafted. It is essential to ensure that all commercial documentation deals with the likely eventualities and that important issues are not left to be dealt with by way of ‘understandings’.