Kingerlee Holdings Ltd v Dunelm (Soft Furnishings) Ltd

Agreement for lease – Retail premises – Detailed provisions linking grant of lease to practical completion of building works and providing for postponement of obligation to pay rent in certain circumstances – Whether defendant tenant obliged to take lease once practical completion certificate issued – Whether certificate invalidated by failure of claimant landlord to comply with prior requirement to afford defendant opportunity to inspect premises and make representations – Whether rent commencement date to be postponed – Claim for specific performance allowed – Rent commencement date postponed By an agreement for lease dated October 2010, the defendant home furnishings retailer agreed to take a lease, as anchor tenant, of one of three units to be developed by the claimant on a retail park in Oxford. The agreement provided for the grant of the lease to take place 10 days after practical completion of the building works. Clauses 6.3 and 6.4 required the claimant to ÒprocureÓ the giving of notices by its agent to the defendant, informing it of an inspection of the premises to be carried out by the claimantÕs agent with a view to issuing a practical completion certificate under the relevant building contract. The defendant was entitled to make representations before that certificate was issued. Where a certificate was issued and the defendant claimed that it should not have been, the dispute was to be referred for determination by an independent expert pursuant to clauses 6.8 to 6.11. The agreement provided for a rent-free period of 568 days, which could be postponed in certain events. In June 2012, the claimant’s agent issued two practical completion certificates, one for the building of the units and a second for the common parts of the development. In the same month, the defendant entered into occupation of its unit in order to carry out certain tenant’s works; it began trading from the premises in August 2012. The claimant maintained that the defendant’s obligation to take the lease was triggered in July 2012, when an outstanding planning requirement relating to the development was fulfilled, and that the rent commencement date should fall 568 days from that date. It brought a claim against the defendant for specific performance and a declaration as to the rent commencement date, and applied for summary judgment in its favour. The defendant argued that it was not yet obliged to take the lease since the claimant had not served the required notices under clauses 6.3 and 6.4, with the result that no valid practical completion certificate had been given and there was no practical completion date within the meaning of the agreement. It further submitted that, if it was obliged to take the lease, then the rent commencement date should be postponed until August 2012, when a further planning issue, relating to the size of a “totem” board bearing the names of the occupiers of the three units, had been resolved. Held: The claim was allowed. (1) On the true construction of the agreement for lease, it was not a necessary requirement for the issue of a valid practical completion certificate that the tenant should have been given the opportunity, under clauses 6.3 and 6.4, to participate in inspections and to make representations. A breach of those clauses would sound a breach sounds only in damages or in some other award by an independent expert as provided by the agreement. The agreement contemplated the existence of a building contract pursuant to which a practical completion certificate would be issued. The building contract would have its own mechanism governing the timing and requirements of practical completion. The claimant’s agent was required to have regard to the terms of that contract, and to the legitimate interests of the builder, in issuing the certificate. Clauses 6.3 and 6.4 should not be construed as precluding the issue of a valid practical completion certificate under the building contract until additional requirements under the agreement for lease, to which the builder was not a party, were fulfilled. The parties were unlikely to have intended such a result. The words used in clauses 6.3 not 6.4 were not apt to create a condition precedent. The clauses were expressed in terms of what the claimant was to “procure”; such wording was more appropriate to impose an obligation on the landlord to allow participation than to inject requirements going to the validity of the certificate. The opportunity of the tenant to participate in the process leading up to a practical completion certificate was not worded in such a way as go to the heart of the process. If the claimant’s agent issued a practical completion certificate, then practical completion for the purposes of the agreement occurred. The agreement for lease anticipated that a practical completion certificate might be issued in circumstances where the tenant objected and did not suggest that the validity of the certificate would thereby be impeached; rather, it pre-supposed that the certificate would be valid. Accordingly, practical completion had occurred for the purposes of the agreement for lease and the defendant was not entitled to resist an order for specific performance by reason of the failure to give it an opportunity to participate in the practical completion certificate mechanism. (2) The permission required for the totem board, under the statutory regime of the Town and Country Planning (Control of Advertisements) (England) Regulations 2007 regarding signage, was properly regarded as a form of planning permission or planning consent so as to fall within the definition of “planning requirements” under the agreement for lease. However, it did not meet the further requirement under that agreement that the permission should be something that was required before the defendant could lawfully open the premises for trade. The planning issue over the totem board did not mean that the defendant’s opening of the premises for trade was unlawful. Consequently, it did not give rise to any postponement of the rent commencement date. Karen Shuman (instructed by Jones Day) appeared for the claimant; Tim Leader (instructed by Spearing Waite LLP, of Leicester) appeared for the defendant. Sally Dobson, barrister