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This page contains material dealing with the following points on break clauses
  • Effect of dilapidations settlement on break clause.
  • Tenant's right to break passing on assignment

Effect of a dilapidations settlement on a break clause

Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd
[2007] EWCA Civ 7


The Court of Appeal has held that a compromise agreement settling a dilapidations claim deprived the landlord of the right to rely upon the conditions of a break clause. Thus, although T failed to leave on the break date, the break notices were still valid, and the lease had come to an end.


T had the benefit of a break option to determine the lease on 30 December 2004 upon giving not less than 6 months notice in writing to the landlord, and conditional upon:
    "the Tenant [having] paid the yearly rent reserved by this Lease and substantially performed and observed the Tenants' material covenants up to the date of expiry of the notice"
and further conditional upon the tenant delivering up the premises by the break date.

The landlord served a schedule of dilapidations after the tenant had exercised the break option. The parties then entered into a settlement agreement pursuant to which the tenant paid a substantial sum of money to the landlord in consideration of the landlord releasing the tenant "absolutely from its liabilities, covenants and obligations past and present under the Lease so far as the same relate to state and condition of the Premises." The tenant also covenanted in the settlement agreement to keep the premises in no worse state than they were in on the date when a schedule of condition was prepared.

Unfortunately, the tenant did not vacate the premises by the break date and the landlord brought proceedings contending that the lease was still in existence because the tenant had failed to comply with the conditions for exercising the break option - namely it remained in occupation.

First instance

At first instance, Lewison J. held that the effect of the settlement agreement was that the landlord had waived the right to rely on the remaining conditions of the break clause in order to defeat the notices already served. He applied the "officious bystander" t ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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