Edward Lee & Company [1974] Ltd v N1 Property Developments Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Charleton
• Judgment Date: 12 March 2013
• Neutral Citation: [2013] IEHC 162
• Court: High Court
• Docket Number: Record number 11692P/2011
• Date: 12 March 2013

Edward Lee & Co [1974] Ltd v N1 Property Developments Ltd

An Ard-Chúirt

Commercial

Between

Edward Lee and Co. [1974] Limited

Plaintiff

And

N1 Property Developments Limited

Defendant

[2013] IEHC 162

Record number 11692P/2011

The High Court

LANDLORD AND TENANT

Lease

Requirement of six months' notice to determine automatic extension - Four days' notice of intention to surrender lease given by plaintiff - Earlier ruling that notice valid to determine automatic extension of lease and did not disentitle plaintiff from statutory relief - Premises vacated two years after notice given - Terms of holding of property during two years after notice - Continuation in possession upon expiry of lease merely evidence of new tenancy - Payments less than rent due under lease made during period of overholding - Obligation of tenant to pay reasonable sum in lieu of rent as a result of staying in property and trading - Whether new tenancy created as result of overholding - Whether inference or presumption of new tenancy arose on facts - Whether tenancy from year to year during period of overholding - Reasonable period of notice in context of lease to facilitate refurbishment and securing of new tenant - Whether requirement of six months' notice reasonable - Whether notice given sufficient to determine lease on four days' notice when six months required by lease - Mesne rates - Determination of reasonable remuneration in respect of occupation - Fair market rent - Whether rent in lieu of notice or notice during period of use of property allowable in assessment of fair remuneration to landlord - Twil Ltd v Kearney [2001] 4 IR 476 applied - Meath v Megan [1897] 2 IR 477; Phoenix Picture Palace Ltd v Capitol and Allied Theatres Ltd [1951] Ir Jur Rep 55; Baumann v Elgin Contractors Ltd [1973] IR 169 and Dean and Chapter of the Cathedral and Metropolitan Church of Christ Canterbury v Whitbread plc [1995] 1 EGLR 82 followed - Decree in favour of defendant (2011/11692P - Charleton J - 12/3/2013) [2013] IEHC 162

Edward Lee and Co v NI Property Developments Ltd

Facts: The plaintiff tenant held a 36 year lease from the defendant landlord of commercial premises. A clause of the lease held between the parties indicated that there would be an automatic 36 year extension of the lease if notice was not given by the tenant to the landlord at least 6 months before the expiry of the lease. Four days before the lease was due to expire in late January 2011, the tenant gave the landlord notice that the lease would be surrendered on its expiry. In the proceedings that resulted, relief in equity was granted to the tenant on the 12th November 2012 against being held to have entered into a new 36 year lease. However, the judgment failed to indicate what notice was required of the tenant and a supplemental judgment was sought. The tenant continued in possession of the premises until they were vacated in December 2012 without a fresh lease ever being signed. The landlord claimed that following the expiry of the lease, an automatic year to year lease was created which required 6 months notice to quit. If the court determined that no new lease was created, the landlord argued that he was entitled to a mesne rate of rent in arrears.

Held by Charleton J that although it was clear that the tenant was late in surrendering the tenancy, this was likely because the pending court proceedings did not conclude until November 2012. If at that point the court had determined that the tenant was locked into a new 36 year lease, it would have been more beneficial to continue to trade and make a profit from the premises in the interim period. However, by staying in the premises, the tenant was obliged to pay a reasonable sum in lieu of rent. It was also held that given the length of the lease, a period of 6 months notice was reasonable to allow the landlord time to find a new tenant and make necessary refurbishments.

In terms of the claim that a new year to year lease was created on the expiry of the old one, it was held that this extension of terms was not an automatic rule of law and could be rebutted depending on the circumstances of any arrangement held between the landlord and tenant for such an eventuality. In the present case, there was nothing to suggest an arrangement had been agreed between the parties that a year to year lease would be created on the expiry of the 36 year lease. The fact the landlord had originally claimed a new 36 year lease had been created made this clear.

However, it was determined that the landlord was entitled to reasonable remuneration for the period of time in which the tenant remained in the premises pursuant to section 46 of the Landlord and Tenant Law Amendment (Ireland) Act 1860. In determining a reasonable value, it was determined that account should be given to the value of the appropriate rent of the premises on the open market, what the reasonable period of notice to quit would be, the character of the property, the length and circumstances of the overholding of the premises, and the length of time it would take the landlord to make attempts to secure a new tenant. In those circumstances, it was held that the tenant was obliged to pay an open market rent from the time period between the expiry of the lease and the vacating of the premises, as well as an additional six months to take account of the period of notice to quit. The open market rent for the premises was determined to be €200,000 per annum. As the tenant had already paid the landlord €485,417.90 in November 2011, the outstanding balance owed to the landlord was determined to be €358,447

Judgement in favour of the defendant for the sum of €358,447

HARRISON THE LAW & PRACTICE RELATING TO EJECTMENTS IN IRELAND 1903 17-19

EARL OF MEATH v MEGAN 1897 2 IR 477

PHOENIX PICTURE PALACE LTD v CAPITOL & ALLIED THEATRES LTD 1951 IR JUR REP 55

BAUMANN v ELGIN CONTRACTORS LTD 1973 IR 169

TWIL LTD v KEARNEY 2001 4 IR 476 2001/24/6410

LANDLORD & TENANT LAW AMDT ACT IRL 1860 S46

WYLIE & FARRELL LANDLORD & TENANT LAW 2ED 1998 PARA 27.17

DEAN & CHAPTER OF THE CATHEDRAL & METROPOLITAN CHURCH OF CHRIST CANTERBURY v WHITBREAD PLC 1996 72 P & CR 9 1995 1 EGLR 82 1995 69 P & CR D34

Judgment of

Mr. Justice Charleton

1 This judgment is supplemental to that of the 12^th November, 2012. It has been argued that the prior judgment has effectively decided the proper approach of the Court in the issue now before it. A full reading of the judgment indicates that this is not so. In that judgment, the Court held that the plaintiff tenant was entitled to relief in equity against a situation where the 36 year lease, on which it held a Dunnes Stores Clothing shop in the defendant landlord's premises known as the Northside Shopping Centre, provided for an automatic extension at the same excessive rent for a further 36 years unless notice was served 6 months before that lease was due to expire in late January, 2011. Clause 4.03 VII of the lease was in issue in that judgment. Four days before the lease expired, and not six months as the lease required, a notice was sent by the plaintiff tenant stating that the lease would be surrendered on its expiry. The window of opportunity to do this had ceased, however, because that window operated only from the 1^st February, 2010, to the 31^st July, 2010. Relief in equity was granted to the plaintiff tenant against being locked into another 36 year lease by holding that the notice should operate to determine the automatic 36 year extension of the lease. In the context of the entire judgment, paragraph 35 makes that decision explicit:

2 In the result, the notice given by the plaintiff tenant to the defendant landlord that it did not wish to exercise the option of a new 36 year lease on the same terms as the previous 36 year lease is valid. Such notice does not disentitle the plaintiff tenant from statutory relief.

3 After that judgment, the plaintiff tenant did not seek a new tenancy pursuant to the Landlord and Tenant (Amendment) Act1980. That judgment did not decide what notice would be required to relieve the plaintiff tenant of all of its obligations to the defendant landlord; only that relief should be given in equity in order to treat the notice as stopping a new 36 year lease coming into operation. The Court was not asked if the notice was valid to determine a 36 year lease on four days notice when the terms of the lease required six months notice. Nor did that judgment decide whether a new tenancy had come into operation by virtue of the overholding of the plaintiff tenant; the premises only having been vacated on the 9^th December, 2012; in round terms a full two years after the notice from the plaintiff tenant that it wished to vacate. Nor did that judgment decide what the terms of that holding of the premises by the plaintiff tenant might be. The defendant landlord claims that it is automatically a tenancy from year to year; thus requiring six months notice expiring on a gale day. Finally, should a tenancy not have been created by the overholding of the plaintiff tenant, the defendant landlord pleads by way of amendment to the defence and counterclaim an entitlement to mesne rates.

4 The overholding of the premises by the plaintiff tenant took place in particular circumstances. On the 27^th January, 2011, the solicitors on behalf of the plaintiff tenant wrote to the defendant landlord that the tenant would not be renewing or extending the 36 year lease. This was accompanied by a statement that arrangements were being made to vacate the unit and to hand over the keys. On the 15^th February, 2011, the landlord replied protesting that as no effort had been made to hand over the keys, this lack of action made it clear that the tenancy was being extended. It is fair to say that the main dispute in the case was then...