In the case of Warborough Investments and Lunar Office the courts found that the grant of an underlease was a breach by the tenant of the headlease.
Clause 4(21) of the headlease included various provisions by the tenant not to assign or underlet except upon certain terms and conditions.
Clause 4(21)(b) required the tenant to “assign the complete floors or shop units for terms of not less than 10 years and at such rent or rents and upon such terms generally … as shall accord with the principles of good estate management and with the duty … of managing the demised premises to the best commercial advantage”.
Clause 4(21)(c) also required the tenant to grant any assignment for the best rent reasonably obtainable unless the landlord consented otherwise.
The parties were aware that despite the above provisions the underlease which had been granted by the tenant and defendant in these proceedings was not for the complete floor space and was for a term of less than 10 years. This of course meant that 2 of the conditions in 4(21)(b) had already been breached. However, the tenant argued that the clauses were self-contained so that if 1 or 2 conditions were not complied with it was not a breach of the tenancy because despite clause 4(21)(b) being breached clause 4(21)(c) had been complied with and the best rent reasonably obtainable was being achieved.
The Court of appeal held that the clauses agreed between the parties should be given their natural meaning. Clause 4(21)(c) did not depend on clause 4(21)(b) and there was in fact no link between them. The clauses should be read as separate independent conditions, and each had to be complied with by the tenant prior to any assignment. The tenant did not have the right to pick and choose between the clauses and decide which to comply with. The clauses were a series of negative conditions all of which should have been complied with by the tenant.
Comment
This is yet another a case on consent but as we have stated previously the topic is before the courts quite often at present. This is no doubt due to the current economic climate and as such if it is a problem faced by landlords and tenants advice should be sought before documents are executed.
