Interesting Commercial Property Cases

In this article we will cover a select few cases in which have set precedent in commercial property in different areas of interest, and the lessons we have learned from these.

Commercial property contracts

Lee-Parker and Another v Izzet and Others [1972] showed that a condition of the contract must be precise in its drafting, as the court ruled that a satisfactory mortgage was too vague, and the contract was made void. Janmohamed v Hassam (1976) supported this point, where the condition of the contract stated that a mortgage satisfactory to the buyer was acceptable drafting, as an obligation on the buyer’s satisfaction was reasonable. The contract should therefore clearly set out what obligations must be carried out, by whom, how and by when the performance of the obligation should be complete.

Environmental considerations

Consideration for the environment has become increasingly important for the commercial property landlord and tenant as contaminated land may pose a significant risk to humans and animals. It is usual for the polluter to clear up contaminated waste; however the current owner may become liable, and this is why searches are usually carried out on commercial land. In Circular Facilities (London) Ltd v Sevenoaks District Council [2005], the rotting of vegetables caused millions of pounds’ worth of cleaning up.

The intended use of the land must also be considered as it may interfere with a neighbour’s enjoyment of their property (known as nuisance). For example, the case of Dennis v Ministry of Defence [2003] involved turbulence and aircraft noise, and Rylands v Fletcher sets the precedent that liability lies with the escape of the contaminant from the land. The rules set out in this case, however, expand on this area of law greatly and must be considered with care.

Obligations under a lease

BHP Great British Petroleum Ltd v Chesterfield Properties Ltd [2001] was a case which shows that there is no automatic release of the landlord’s obligations when the lease comes to an end; the landlord must serve notice. The release of the landlord’s obligations may be expressly drafted into the lease as seen in Avonridge Property Co Ltd v Mashru [2005].

On assignment, the original tenant may be liable for the obligations of the assignee, however if the lease is varied, the new terms will not bind the original tenant, as we see in Friends Provident Life Office v British Railways Board [1995].

Who repairs what? The tenant must keep the property in good repair (as considered in Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980]). Renewal of the building is to go further than the covenant to repair, as Lister v Lane & Nesham [1893] outlines that the tenant is not obliged to make new the property. The standard of the repair must consider the age, character and locality of the property, and good repair does not mean perfect repair, but reasonable repair (Commercial Union Life Assurance Co v Label Ink Ltd [2001]). The landlord will often repair the exterior of the property as well as the structure and common parts. It is common practice for the landlord to also insure the leasehold building, however the tenant may wish to be noted as an interested party on the insurance. The lease may set out that the tenant is to reimburse the landlord for the insurance premium; this may be through a service charge and be apportioned between tenants, for example, in a shopping centre.

The above cases cover a small amount of commercial property law; they do, however, help the landlord and tenant to consider the wider issues which may arise in commercial property and help to think about how these issues may be avoided from the outset.

Frequently Asked Questions

Why is contract drafting so important in commercial property transactions?

Careful drafting ensures that all parties understand their obligations, timelines, and responsibilities. This reduces the risk of misunderstandings and costly legal disputes.

Who is responsible for contaminated land?

While the polluter is usually responsible for remediation, liability can sometimes fall on the current owner or occupier of the land. Environmental due diligence and property searches are therefore essential.

What is a nuisance in commercial property law?

A nuisance occurs when the use of one property interferes with another person’s enjoyment of their land. Examples include excessive noise, pollution, vibrations, or other activities that cause unreasonable disturbance.

Are landlords automatically released from their obligations when a lease ends?

Not necessarily. Depending on the terms of the lease and the applicable legal principles, landlords may need to take specific steps, such as serving notice, before certain obligations come to an end.

Can a tenant remain liable after assigning a lease?

In some circumstances, the original tenant may remain responsible for certain lease obligations after assignment. The extent of liability will depend on the lease terms and any subsequent variations.

Examples

Example A

Purchasing contaminated land

An investor purchases an industrial site intending to redevelop it into office space. During construction, contamination from historic chemical storage is discovered. Although the investor did not cause the contamination, they face significant clean-up costs and delays. This highlights the importance of environmental searches and due diligence before acquisition.

Example B

Lease ends, but obligations remain

A landlord assumes all responsibilities under a lease end automatically when the tenant vacates. However, the lease requires formal notice to be served before certain obligations cease. The landlord subsequently incurs unexpected liabilities. This scenario illustrates the importance of understanding lease termination procedures.