Agreement for Lease: Landlord’s Obligation to Grant Lease not Personal so Tenant Liable to take Lease from Landlord’s Successor (High Court)

The High Court (Kelyn Bacon QC) has held that a tenant (Bella) had not validly terminated an agreement for lease (agreement) and was liable to complete the lease with the new freehold owner (Ropemaker).

The freehold had changed hands after Bella had entered into the agreement. Bella had argued that it could refuse to accept the lease as Ropemaker was not the original contracting party, and the landlord’s obligation to grant the lease (clause 15.1) was personal to the original freeholder. The court disagreed: the landlord’s obligation in clause 15.1 was not personal and could be performed by Ropemaker as transferee.

The court noted that the agreement:

• Did not state that references to landlord and tenant included the named parties’ successors in title. However, many specific provisions were expressed to be personal to a party and the agreement did spell out that it was non-assignable by Bella. It was striking that no similar provision had been made in respect of clause 15.1.
• Listed the provisions personal to specific parties, which did not include clause 15.1. The only sensible interpretation was that the parties had not intended to make the obligation to grant the lease personal to the original landlord.
• Included, as an annexure, a draft lease which named the original freeholder as the landlord. However, nothing turned on this, as the draft lease did explicitly state that references to the landlord included successors in title.

Furthermore, if every obligation in the agreement was intended to be personal, those clauses expressly containing personal obligations would be entirely redundant.

As the court had found against Bella on the basis of contractual interpretation, it did not need to consider the landlords’ alternative case that the Landlord and Tenant (Covenants) Act 1995 had the effect of transferring to Ropemaker both the benefit and burden of the agreement.

This case is an important reminder not to assume that agreements for lease will be personal to the named parties. If the entire agreement (or specific provisions) are intended to be personal, the agreement needs to expressly provide for that (Bella Italia Restaurants Ltd v Stane Park Ltd and others [2019] EWHC 2747 (Ch) (21 October 2019)).

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