Case Law Compendium

The last few months have been particularly active in the property litigation sector.

It will come as no surprise for many to realise that the bulk of that activity has focussed heavily (although not exclusively) on the struggles faced both by individual business and the wider economy at large.

First in our tour of the recent cases features the aged old issue of the exercise of break options and the need to proceed with great caution when considering the exercise of such a right.

In HFI Farnborough Limited -v- Park Garage Group (2012), HFI were the owners of 4 petrol service stations. 25 year leases of these petrol stations had been granted to Park Garage Group Plc ("Park Group"). Separate overage agreements were also entered in respect of each lease. Each lease contained break options permitting HFI to terminate on 3 month's notice. The conditions of the break options were, amongst other things:

(i) that HFI could exercise the break option only if the "value of the Premises" on the date the break option was exercised exceeded the price HFI had paid for the freehold of the relevant site with vacant possession,

(ii) if the break options were exercised, HFI was required to pay overage to Park Group on completion of a sale of the petrol stations.

In April 2012, HFI served break notices on Park Garage accompanied by letters from a valuer alleging that the value of the petrol stations exceeded the prices referred to in the leases. HFI denied that it was obliged to sell the petrol stations in order exercise the break option. Park Garage claimed that the break notices were invalid and HFI brought proceedings claiming possession of the petrol stations.

The issues that arose for the High Court were whether:

HFI was permitted to exercise the break option if there was no agreed sale of the petrol stations; and if HFI were entitled, should the leases should be rectified for mutual mistake. The High Court ruled that the break conditions were linked and the break option could only be exercised on a sale. A reasonable person would understand that the term "value of the property" would mean the new price of the petrol stations with vacant possession. It was unlikely that the parties intended that there should be both a sale of the petrol stations and a valuation of the properties. As the Court held that HFI were not entitled to exercise the break options issues of rectification did not arise.

However, the Court did make obiter comments that a party seeking...