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Material compliance and breaches

What happens if the tenant is in breach? Is there a minor breach? Has the tenant materially complied with the terms of the lease? Is the tenant required to pay the full-quarter's rent if the break is due to take place in the middle of the quarter? Do any of these matters prevent the tenant from exercising the break clause?


Material compliance

Fitzroy House Epworth Street (No 1) Ltd v The Financial Times Ltd
[2006] EWCA Civ 329

Summary

This case was concerned with a lease where the tenant wanted to operate a break clause but was only able to do so so long as it was not in "material" breach of covenant. The Court of Appeal has given very helpful guidance on how one determines materiality. The Chancellor of the High Court:
    "Materiality must be assessed by reference to the ability of the landlord to relet or sell the property without delay or additional expenditure. Where the provision is absolute then any breach will preclude an exercise of the break clause. But I see no justification for attributing to the parties an intention that the insertion of the word 'material' was intended to permit only breaches which were trivial or trifling. Those words are of uncertain meaning also and are not the words used by the parties. Nor is it, in my view, of any assistance to consider whether the word 'material' permits more or different breaches than the commonly used alternatives 'substantial' or 'reasonable'. The words 'substantial' and 'material' depending on the context, are interchangeable. The word 'reasonable' connotes a different test. The issue here is whether, notwithstanding the breaches found by the judge the Tenant had, nevertheless, 'materially complied' with its obligations. The application of an ordinary English word to a set of primary facts is itself a question of fact.." (paras 35 and 36)
Facts

In this case the property was a substantial one with a rent of £595,000 per year (which was up to date when the notice was given and when it took effect). The tenant spent nearly £1 million putting the property into repair before it left. There were some repairs outstanding but the maximum value of the defects amounting to a breach of the repairing covenants was no more than £20,000, including supervision fees. However, it was not this ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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