Tenant Pays Price for Incomplete Paperwork

February 29, 2012

Tenant Pays Price for Incomplete Paperwork

The wisdom of making sure that agreements are finalised in good time and not left hanging in abeyance is illustrated by a recent case.

It involved a local authority and a shopkeeper tenant who ran a convenience store.

The tenant wished to take a lease on the adjoining premises, which were also owned by the local authority, and heads of agreement were prepared setting out the proposed terms of the new tenancy, which would include both premises.

The lease was on terms favourable to the tenant as she would have to undertake considerable expenditure on the new premises.

The conveyance of the lease was, for various reasons, never completed, although the tenant pressed on with the expenditure to bring the new premises up to the required standard.

Several years later, the local authority sold the freehold of the property. The new owner wished to renegotiate the lease terms with the tenant on the basis that it was not bound by her agreement with the council because agreements relating to land are required to be in writing and signed by the parties to the agreement.

The tenant claimed that the new owner was prevented from renegotiating the terms because she had acted in accordance with the (incomplete) agreement to her detriment and therefore should be allowed to complete the lease on the agreed terms. The landlord, she argued, had waived its right to require her to complete the documentation (under what lawyers call the ‘principle of estoppel’).

However, in the absence of any formal waiver of its rights by the previous landlord, the Court of Appeal ruled that it had not waived its rights and the new landlord was not bound by the purported lease nor estopped from seeking a renegotiated lease.