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GKN Aerospace wins appeal over exercising break clause

Posted: 3rd September 2020   In: Business Employment

GKN Aerospace has won an appeal over a break clause for a flat it had leased.

The issue arose after GKN leased the flat from Duncan Investments Ltd in 2015.

The lease contained an option to renew, and a break option entitling GKN to terminate on giving at least two months' notice.

 During the second year, the parties agreed to a further extension of the lease, until 23 October 2019, which was recorded in an addendum. Clause 2 of the addendum contained a break option, which provided that the "tenant may for this addendum only serve notice at one point, being three months prior to the anniversary of the first year".

The addendum was not drafted by lawyers.

On 1 June 2018, GKN gave notice to terminate the lease. Duncan rejected the notice on the basis that it was premature.

A county court judge agreed, holding that GKN had not validly exercised the break option. He interpreted cl.2 as meaning that the break notice had to be received on a specific date, namely 24 July 2018, in order to terminate the tenancy on 23 October 2018.

The High Court has overturned that decision. It held that the meaning of cl.2 was ambiguous when the factual background was considered. The clause was intended to change the break option in the lease; the commercial purpose was to give the tenant the right to terminate the lease only subject to reasonable notice being given to the landlord, and to provide clarity to both parties as to whether the break option had been validly exercised.

GKN’s interpretation of cl.2 was in accordance with that purpose. By contrast, requiring notice to be served on a single day served no true commercial purpose.

A strict requirement for notice to be on a single day was exceptionally rare in practice and, if that had been the parties' intention, they would have used more specific language to explain that change.

The judge had been wrong to conclude that there were commercial reasons for requiring a 24-hour service window.

Please contact David Rushmere if you would like more information about the issues raised in this article or any aspect of employment law.

GKN Aerospace wins appeal over exercising break clause
Ch D (Fancourt J) 02/07/2020



Posted by: David Rushmere
Luton Office