There have been a number of recent cases which have underlined the importance of getting it right with lease drafting at the outset. In doing so, when changes to a lease have been sought subsequently, the Court has declined on numerous occasions such requests and safeguarded a Landlord’s legal and intended position with their Tenants.
In 2023, the Supreme Court reviewed in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd an annual service charge certification clause in a commercial lease. The clause was the subject of various interpretations before it had reached the Supreme Court, with the High Court ruling that the certificate definitively concluded matters relating to costs expended by the Landlord but failed to resolve whether the Landlord could actually charge those costs. On appeal, the Court of Appeal overturned the High Court and held that an annual service charge certificate determined the tenant’s overall liability.
At the Supreme Court, a further approach was set out in their judgment with what has been described as a ‘pay now, argue later’ approach’. This effectively means that a commercial tenant must pay the sum demanded by a service charge certification clause. In doing so, the Court protected the determined priority in such cases i.e. the Landlord’s cash flow position. At the same time, the Supreme Court sought to ensure a balance with the tenant’s rights in so far as it was reiterated that a Tenant still preserves the right to subsequently challenge the apportioned annual service charge sum.
Consequently, this case law has reiterated the need for lease clauses on service charge to be appropriately drafted in advance so that the leasehold definitions together with the annual related certificates and possible tenant rights are addressed with proper attention at the outset. In addition, there should be sufficient focus and consideration by the lawyers involved and their clients on determining the potential challenges that may arise during the normal course of a leasehold relationship in maintaining and repairing a building.
Further recent case law has also reiterated that leases cannot simply as a general principle be re-written subsequently to reflect the Tenant’s changing business position after the commencement of a lease. Accordingly, in Kwik-Fit Properties Ltd v Resham Ltd [2024/25], the Courts did not uphold Kwik Fit’s request for a 5 year break clause in a lease renewal in the absence of a business necessity borne out on the facts of the case. From another perspective, and speaking ideally, a commercial tenant should therefore seek to address the need for such a clause in their prior negotiations with the Landlord before the lease commencement. Failing which, and perhaps in the absence of agreement between the parties prior to entering into such a lease, a commercial lease will remain as drafted unless there is an overriding legal justification as determined by the Court to support a change from the original wording of a lease.
Thirdly, in Clipper Logistics Plc v Scottish Equitable Plc (2022, reaffirmed recently), the Tenant’s position was affirmed by the Court over the Landlord’s approach to re-write a commercial lease on a business lease renewal. In that case, the Landlord sought with new wording to avoid a fall in the Energy Performance Certification rating and also sought to shift the particular environmental costs for such work to the premises on to the Tenant
together with the maintenance thereafter of the energy standard. The Court determined however that a reinstatement clause was acceptable but the additional clauses were considered an unfair additional burden on the commercial tenant. Accordingly, any desire on the part of either the Landlord or the Tenant to deviate from the original status quo as set out in the lease clauses agreed between the parties at the outset will be met, if subject to a court’s determination, with general court principles that seek to maintain the original construction and general interpretation of the lease.
Finally, other recent cases have reiterated the level of justification that a property litigant would need to establish before the court in proceedings:
(i) In Spirit Pub Company v Pridewell Properties [2025], the High Court determined that the Landlord had not provided enough evidence to substantiate that funding was in place for redevelopment. Accordingly, the Court did not agree to the Landlord’s claim to reject a business lease renewal. Therefore, a Landlord must also be aware that break clauses will be determined strictly by the Courts with a rigorous approach applied to any determined wish to end a business lease.
(ii) In Cooper v Ludgate House Ltd, the Court determined that that lease demises definition required attentive wording to cover the particulars of a Property’s fixtures and boundaries. Failing which, the Landlord and Tenant’s responsibilities could be allocated to the wrong party.
Therefore, in summary, it would be wise for lawyers to consider carefully at the outset of any new instruction any memorandum from estate agents and discuss with their clients any perceived issues with the agreement reached in principle with the other party. On such matters, I recall a former law lecturer’s wise note to the students in the lecture hall that ‘it’s all a matter of interpretation’. However, with a careful review and consideration of the client’s business needs, the final version of a lease should hope to cover with sufficient certainty the general range of permutations that can arise during a landlord and tenant business relationship.
RICHARD GREENBY qualified solicitor and Partner has extensive experience in residential and commercial property transactions acting for landlords and tenants, buyers and sellers.
Contact us at Lewis Nedas Law on tel. 020 7387 2032 or on our website using our online enquiries form.