Alexandra Townsend Wheeler, paralegal at Bircham Dyson Bell LLP
suggests that tenants wishing to exercise a break clause which is
conditional on all sums due under the lease having been paid must
look very closely at the rent obligations in the lease to avoid the
break being frustrated.
"Break clauses are becoming increasingly more important
to tenants in the current economic climate, but there have been
some documented failures to adhere to obligations in the lease in
order to exercise a break without issue," said Alexandra
"Most recently, tenants are being warned to pay
particular attention to interest owing on late payments of rents
reserved by their lease. If the lease states that interest is
payable on late payments regardless of whether it is demanded by
the landlord, tenants must consider whether any of their payments
to the landlord throughout the term of the lease have been made
late. The tenant needs to make sufficient enquiries to ascertain
any level of interest payable in order to ensure that all monies
due under the lease are paid up to the date of the break.
In the case of Avocet Industrial Estates LLP v Merol Limited
such enquiries were not made and the tenant's exercise of its
break option was frustrated.
"Times are changing; tenants often find during their
lease term that they need smaller premises, or alternatively they
are struggling to make rental payments. On the other hand,
landlords can struggle to find appropriate new tenants, so the
exercise of a break clause is of vital importance to both
parties," said Alexandra Townsend Wheeler.
"A brief warning to landlords however is that if a
landlord knows a tenant mistakenly believes it does not owe any
sums due under the lease, and the landlord does not correct that
belief, the landlord is unable to take advantage of the
tenant's mistake. It would be estopped from contending that the
break was invalidly exercised on the basis that any sum was due and
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The Court of Appeal has recently refused to amend a legal charge registered at the Land Registry, even though it would have given effect to the parties’ common intention (which had been mistakenly missed out of the charge).
With the current economic climate, landlords are increasingly finding that they have vacant units which they will often wish to secure occupation of on a short term basis, while they market the unit for a longer term let.
Following Judge Pelling QC’s decision in Leisure Norwich (2) Limited & Others v Luminar Lava Ignite Limited (in administration) & Others  EWHC 951 (Ch) (reported in the June 2012 edition of BDB’s Property & Insolvency Bulletin), rent which is incurred prior to a tenant going into administration must be proved like any other pre-administration debt and cannot be paid as an expense of the administration.
The FIDIC Contracts Committee has issued a Guidance Note dealing with the powers of, effect of and the enforcement of Dispute Adjudication Board (DAB) decisions.
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