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Recent Court of Appeal decision highlights the importance of clear drafting in commercial leases

11 June, 2018

The Court of Appeal’s recent decision in Hipwell & Son v Szurek [2018] EWCA Civ 674 sheds some interesting light on how the Court will approach situations where it is asked to imply terms in to commercial leases and is an important reminder that the lease should expressly deal with all respective obligations between the landlord and tenant.

In Hipwell a covenant on the part of the landlord was implied by the Court to the effect that the electrical installation and other service media was safely installed and that it continued to be covered by any requisite certificate. The landlord, having breached that implied term, meant the tenant was entitled to rescind the lease and recover damages, interest and costs.

In coming to its decision, the Court made the following points:

  • Following the principles identified by the Supreme Court in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and ant [2016] AC 742, the Court reiterated that it will not imply a term in to a lease where there already exists a provision that expressly covers the point.
  • The lack of an express provision in the lease regarding the exterior of the premises, its plumbing or electrical installation and supply was considered by the Court to be a ‘plain and obvious gap’.
  • Whilst the lease contained an Entire Agreement Clause, the Court said that this did not prevent the Court’s ability to imply a term in to the lease on the basis that the parties would not wish such a clause to prevent the Court from saving the lease if there is an appropriate means of doing so consistent with and to give effect to what the Court finds to be the true intention of the parties.

This decision highlights the importance of making sure all obligations are expressly set out in the lease, particularly in relation to the exterior of the premises, the plumbing and electrical installation and supply.

It also shows that in circumstances where such obligations are not expressly dealt with, landlords and tenants will not always be able to rely on an Entire Agreement Clause to prevent the Court implying terms in to a lease.

Contact our property litigation solicitors

For further information about protecting your business, contact dispute resolution solicitor Lauren Meade on 01202 983999 or email laurenmeade@steeleraymond.co.uk.

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