Can a court grant an order for specific performance requiring a party that is in breach of contract to take steps to comply with the order before a completion date arrives? We know that a claimant can seek an order for specific performance before a completion date, but none of the authorities go further than this.
Airport Industrial GP Ltd v Heathrow Airport Ltd and AP16 Ltd [2015] EWHC 3753 (Ch) answers the question for us. The case concerned rights and obligations arising under leases of properties at Heathrow Airport. The landlord had agreed to construct a car park containing 280 parking spaces for the tenants of one its properties at its own expense. It was agreed that the car park would be situated on the adjoining property, which the landlord had retained temporarily for other uses, and that use of the car park was to be free of charge.
In due course, the landlord granted a lease of the adjoining property. It required the incoming tenant to provide the car park for its neighbour at its own cost, even though the number of parking spaces required would swallow the whole of the surface area of the site. What made the incoming tenant pay a substantial premium for a lease containing such an onerous obligation? The answer is simple. The tenant planned to construct a large multi-storey car park that would enable it to fulfil its obligations to its neighbour, as well as generating income for itself.
Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64 confirms that the court can order specific performance of a contract to build, if appropriate. The court must consider whether the person with the benefit of the contract can exercise rights of entry to undertake the work itself and, if the building obligation is contained in a lease, whether the landlord can forfeit the lease and carry out the work. Importantly, the court must also ask whether damages will suffice instead. The judge was able to tick all these boxes. The landlord had not reserved any rights of entry onto the car park land and the forfeiture provision had been too narrowly drafted to apply. Furthermore, damages would not provide an adequate remedy if the car park was not built.
However, it was unlikely that the tenant of the car parking area would be able to obtain planning permission and then construct a multi-storey car park before the deadline for completion on 22 October 2016. A surface level car park could be constructed more quickly – but, in either case, the judge still had an important question to answer. Could he make an order for specific performance requiring the tenant to take steps immediately, to ensure that the car park was available as soon as reasonably possible after 22 October 2016? On the basis of the discussion in Hasham v Zenab [1960] AC 316, the judge decided that he could.
After weighing the potential impact of his order on the parties, the judge also decided to extend the deadline for delivery of the scheme until 22 October 2018 to give the tenant of the car parking area an opportunity to carry out a development that would provide it with an income to keep it afloat. The tenant would be required to deposit funds to cover any losses caused by the delay and to achieve agreed planning and construction milestones on time, failing which it would be required to construct a surface level car park instead.
Allyson Colby is a property law consultant
