Obligation to accept a lease binding even though the freehold had changed hands

Although English law restricts the assignment of certain types of contract (for example, a contract where the rights are so personal to the parties concerned that they are not capable of being assigned), parties are generally free to assign the benefit of their contracts to someone else. So, if one of the parties to a contract does not want to deal with anyone else, the contract should contain a clause expressly prohibiting, or limiting, the other party’s right to assign it. Bella Italia Restaurants Ltd v Stane Park Ltd [2019] EWHC 2747 (Ch) concerned an agreement for lease of premises under construction in Colchester. The incoming tenant had changed its mind during the construction process and wanted to extricate itself from the agreement. So it seized on the fact that the landlord had sold its interest in the premises to a third party, and attempted to rescind the agreement for lease on the ground that the new landlord was not the original contracting party under the agreement. The new landlord was ready, willing and able to grant the lease to the tenant. So the question was: did the agreement for lease, properly interpreted, require the lease to be granted by the original landlord, and by no one else? The tenant drew the court’s attention to City Inn (Jersey) v Ten Trinity Square [2008] EWCA Civ 156 and Margerison v Bates [2008] EWHC 1211 (Ch), in which covenants referring to the obligations of particular parties were interpreted as being personal to those parties. It argued that the draft lease attached to the agreement was drafted as a lease that was to be granted by the original landlord, rather than by anyone else, and relied on the fact that the draft lease provided explicitly that references to the landlord and tenant included their respective successors in title, whereas the agreement for lease did not. However, the judge took the view that this was because a large number of the provisions in the agreement for lease were expressed to be personal to one or other of the parties to the agreement, and noted that the obligation to grant the lease to the tenant was not included amongst them. In addition, the agreement expressly prohibited the tenant from requiring the landlord to grant the lease to anyone else and contained an additional provision preventing the tenant from assigning, subletting, charging or otherwise sharing or parting with the benefit of the agreement. But there were no similar provisions in the agreement prohibiting an assignment by the landlord. This difference in the treatment of the landlord and the tenant was telling, and indicated clearly that the obligation to grant the lease should not be construed as an obligation that was personal to the landlord. It followed that the tenant had not been entitled to refuse to accept the lease offered by the new landlord on the date set for completion, or to terminate the agreement, and was liable to complete the lease with the new landlord. Allyson Colby is a property law consultant