Bangers to rights: another reminder of the pitfalls of onerous break conditions
The case of Sirhowy Investments Limited v (1) Henderson and (2) Knight (2014) has provided a further reminder of the pitfalls of an onerous break clause, the Tenants' failure to satisfy a break condition resulting in substantial costs for the Tenants.
The Tenants in the case, Mr Henderson and Miss Knight trading at "Dan's Bangers", rented land in Pontilanfraith, Wales for the purpose of their second hand car sales and repair business.
Planning permission had been granted on 25 November 1999 by Caerphilly County Borough Council permitting the land to be used for car sales subject to certain conditions, one of which required details of a turning area for vehicles delivering to the land to be filed with the Council for agreement with the agreed scheme providing turning facilities to be implemented within 3 months of turning area.
The Tenants entered into a lease for the land on 15 October 2004, the lease being for a 10 year term from 1 February 2005. The lease recorded that the property would not be used for any purpose other than for the sale and repair of second hand cars.
At the Tenants' insistence, the lease included a provision whereby if the Planning Authority objected to the use of the land in the manner permitted by the lease, the Tenants could terminate the lease on 3 months notice. This was, however, conditional upon the Tenants using all reasonable endeavours to obtain planning consent for that use and also having complied with all Tenants' covenants in the lease.
By letter dated 18 August 2008, Caerphilly County Borough Council served a Breach of Planning Notice upon the Tenants, citing a failure to comply with the requirement to provide a turning area for vehicles delivering to the premises. The Notice required the Tenants to submit to the Council proposals for a turning area and thereafter construct and complete that turning area. The Notice also required the Tenants and cease the use of the premises for the sale of motor vehicles until such time as the turning area had been completed.
On 30 March 2010, the Council gave notice to the Tenants that, in light of the Breach of Planning Notice not being complied with, enforcement action was to be taken against the Tenants.
On 9 April 2010, the Tenants' solicitor purported to give notice to the Landlord to exercising break clause. They enclosed a copy of the Council's letter of 30 March 2010 and asserted that by that letter the Council had objected to the use of the premises for the use permitted by the lease.
By letter of 14 April 2010, the Landlord's solicitors disputed the validity of the break notice of 3 grounds. Firstly, it was asserted that planning consent had been obtained to allow the premises to be used for the sale of cars and that the issue raised by the Council concerned a breach of a planning condition attached to that consent. Second, the Landlord argued that the tenants had not used all reasonable endeavours to satisfy the condition. Finally, the Landlord asserted that all lease covenants had not been complied with.
The Court decided the first 2 issues in the Tenants' favour, leaving the question of whether the Tenants had failed to perform with all lease covenants.
The Landlord pursued every available avenue to support its contention that the Tenants had failed to fulfil all its lease covenants, going as far as to argue that the Tenants were in breach of a covenant not to keep livestock at the property by virtue of having a dog!
Unsurprisingly, the Court did not agree that the keeping of a dog breached the covenant prohibiting the keeping of livestock, rejecting also all bar one of the Landlord's claims that the Tenants had failed to adhere to the Tenants' lease covenants. Unfortunately for the Tenants, given the onerous nature of the break condition, that one successful claim was all it took for the break to be rendered ineffective.
The lease contained a number of standard provisions concerning repair and decoration, the Tenants being obliged, amongst other covenants, to keep the premises in "good and substantial repair". The Court held that the patching of a section of fencing with sheeting after it was damaged during a break in, rather than effecting a repair that was in keeping with the rest of the fence, meant that the Tenants had not fulfilled their repair obligations. As a result, the Tenants were held not to have observed and performed all of their covenants as required by the break clause and the break notice was determined to be ineffective.
Break notices can provide a welcome means of ending a lease for both Landlords and Tenants. However, they remain a source of dispute. The Court has consistently shown that it will adopt a very strict compliance approach to break conditions. Consequently, where possible, conditions attached to a break notice should be limited to a requirement to give written notice of not less than a specified period of time.
Posted on: 09/03/2015
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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