New tenant was not entitled to exercise break clause

Businesses need to take great care when taking over a lease on commercial property from another firm.

They may find that they don’t automatically inherit all the entitlements that were granted to the original leaseholder.

The issue arose recently in a case involving a company called Gemini Press Ltd. It took over a lease which had originally been assigned to a firm called Ashdown. The original lease provided the tenant with several entitlements including the right to exercise a break clause.

Gemini later decided to exercise the break clause but was told it could not do so. The County Court held that the break clause referred to Ashdown specifically by name and so the right did not transfer to subsequent tenants who took over the lease.

This meant Gemini was liable to pay rent arrears to the landlord. It appealed but the High Court upheld the decision. It held that there was no doubt that the break clause right was specific to Ashdown and was not transferable.

The economic downturn has made it more difficult to let commercial premises and this has made landlords more willing to assert their legal rights in cases like these. It means that now more than ever, great care needs to be taken when dealing with leases and entitlements.

Please contact Hugh Beeley if you would like more information about the issues raised in this article, or any aspect of commercial property law or landlord and tenant issues.