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Risks of Uncertainty in Commercial Landlord and Tenant Contracts

Posted
October 23, 2023
Litigation

Entering a commercial landlord and tenant relationship involves significant legal and financial commitments. Clear and well-defined contractual terms are crucial for the success of such agreements. This blog explores the risks associated with uncertainty in these contracts following a recent property dispute case.

A Recent Property Dispute Case

Our property dispute resolution team recently handled a case on behalf of a defendant landlord involved in a dispute with their commercial tenant. The dispute revolved around the substantial arrears of rent and the interpretation of agreed contract terms.

Background of the Case

The case stemmed from an agreement between the landlord and tenant where the tenant purchased the landlord's goodwill in a long-standing business. Simultaneously with the purchase of the business, the parties entered into a lease agreement for commercial property owned by the landlord, which would serve as the business's location.

The contract terms were modified at the last minute via manuscript amendments. These amendments, among other things, purported to require the landlord to undertake property improvements. The tenant was entitled to withhold rent if the improvements were not completed.

Dispute Arises

After the lease was completed and the goodwill was purchased, the tenant refused to pay rent, claiming that the agreed-upon property improvements were incomplete, absolving them of any rent payment obligation. In response, the landlord forfeited the lease, following the accrual of arrears, by peaceable re-entry.

The tenant sought an injunction to regain access to the property, a declaration regarding the disputed contract terms, and damages for the landlord's actions in forfeiting the lease.

Legal Arguments

The crux of the dispute revolved around interpretation of the handwritten manuscript amendments. The landlord contended that they had completed the required property improvements and that the tenant was obligated to pay rent from commencement of the  lease.

The court considered the landlord's arguments at trial, drawing on legal principles established in Arnold v Britton [2015] UKSC 36 and Wood v Capita Investment Services [2017] UKSC 24. The court concluded that the manuscript amendments were either poorly drafted or too uncertain to be enforceable, that the landlord had complied with its obligations and the tenant was liable for the arrears of rent.

Lessons Learned

This case highlights the risks associated with poorly defined or uncertain contractual obligations in commercial landlord and tenant agreements. To avoid disputes and costly legal battles, it is essential to ensure that all parties clearly understand their roles and responsibilities.

Seeking Legal Advice

If you have any questions or concerns about landlord and tenant matters, our dispute resolution team, Richard Burraston, is here to assist. You can contact Richard Burraston at Richard.burraston@stevensdrake.com for expert guidance and advice on navigating the complexities of commercial property contracts.

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