Implied terms in commercial property leases

Landlords and tenants alike are being warned of the importance of clear drafting in relation to their commercial property leases following the recent ruling in Hipwell v Szurek. 

In this case, Ms Szurek rented premises from Mr Hipwell to be a café for new or expectant parents.  The terms of the lease were slightly unusual in the sense that they made no reference to the exterior of the property, the plumbing or electrical installations, or which party would have responsibility for them.  Instead, the lease contained an “Entire Agreement Clause”, stating that the lease “constitutes the entire agreement and understanding of the parties relating to the transaction contemplated by the grant of this lease and superseded any previous agreement between the parties relating to the transaction.”

Two separate fire incidents occurred approximately a year into Ms Szurek’s lease; the first on 23^rd March 2013 which caused damage to the circuit breaker, after which Mr Hipwell confirmed he would provide Ms Szurek with copies of the electrical certificate that had been, allegedly, completed before her lease of the property so that she could use this for insurance purposes.  Mr Hipwell failed to provide her with the documentation, and following the second incident on 19^th April 2013, Ms Szurek gave notice to terminate her lease. 

Taking into account the other terms of the lease, and the fact that Mr Hipwell had eventually accepted responsibility for the structure of the building and the electrical installations, the County Court found in Ms Szurek’s favour that Mr Hipwell had committed a repudiatory breach of an implied or collateral obligation as to the safety of the electrics in the property; which were a crucial element to running the premises as a café.  Ms Szurek was awarded £22,750.  Mr Hipwell appealed the decision.

The Court of Appeal upheld the decision of the County Court, ruling that a term must be implied in the lease in order to give effect to the obvious intent of both landlord and tenant.  The lease did not meet this criteria and should have been more explicit when dealing with the electrical installation’s remit and how it met safety requirements.  The presence of an Entire Agreement Clause would not necessarily save a landlord in these circumstances.

Prior to providing any lease for a tenant to sign, or prior to signing a lease as a tenant, both must be clear as to the responsibilities of each party.

If you have any questions regarding your commercial lease as a tenant you can contact Justin Sturdy on 023 8071 7717 or email justinsturdy@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.