More problems exercising break rights

Tenants often find trouble where a break right is to be exercised. In Avocet Industrial Estates LLP v Merol Ltd & Anor [2011] EWHC 3422 (Ch), the tenant had to ensure that, at the break date (17 March 2010), “any payment under this lease due to have been paid on or before that date” had been paid, and that the tenant had “paid to the Landlord a sum equal to 6 months Annual Rent.” The tenant served a valid notice to determine. On 16 March 2010, the tenant’s solicitors sent a letter by hand enclosing a cheque for a sum equal to six months’ annual rent, in order to satisfy the second requirement. Was that too late? In general, debts are to be settled by legal currency, and a cheque is not legal currency. However, the parties may, by express or implied agreement, agree that a cheque will be accepted. The course of dealings between the parties (e.g. the acceptance of rent paid by cheque) may infer an agreement to allow payment by cheque. This was the case here. Hence, the second requirement had been complied with. However, the first requirement had not: the tenant had, on several occasions, been late in paying sums to the landlord, and had therefore incurred interest charges under the lease. Even though no formal demands had been made for the interest, the amounts unpaid resulted in a breach of the first requirement. The judge held that the landlord was not estopped from relying on that requirement by its failure to demand those sums. This case will be considered more fully in the CPI Update.