This month’s CPI Update reports on the latest failed attempt to challenge the application of harsh rules relating to the exercise of tenants’ break rights – Canonical UK Ltd v TST Millbank LLC [2012] EWHC 3710 (Ch). This case will be considered fully in Friday’s webinar: A Comprehensive Guide to Lease Break Rights – tenants’ rights and landlords’ rights.
In the Canonical case, as a condition of its break clause, the tenant was required to have paid rent and other sums due “up to and including” the break date, and to have paid a break premium equivalent to one month’s annual rent. In response to an invoice for payment of the full quarter’s rent and service charge due on the quarter day before the break date, the tenant paid the full amount, but later claimed that the payment was in respect of rent and service charge for the period from the quarter day to the break date, and that the excess could be treated as the one month break premium. The lease reserved the annual rent “yearly and proportionately for any part of a year”. However, the court held that the lease could not be construed as allowing an apportioned payment of rent prior to a break date. The words “proportionately for any part of a year” were taken to apply only at the start and the end of the full contractual term. On that basis, either the rent had not been fully paid by the tenant, or the break premium was not paid. In fact, the June payment by the tenant was clearly attributable to the landlord’s demand for rent and service charge and so it was the break premium that had been left unpaid.