In this case Marks and Spencer PLC ("M&S") had confirmed approval to a redevelopment of part of the Centre and a letting to Primark of the new store created by that development. However, that approval had been given during management committee meetings, not in response to any formal application, by the landlord, for M&S consent. M&S then argued that its lease had not been varied, as required, to permit the development and letting to Primark.
Key facts and circumstances
The key facts and circumstances of this case are set out below.
M&S' 127 year lease of its store ("M&S Lease") included a one third share of what were described as "Shared Areas" - which included the Centre car park.
The M&S Lease had been granted by the Council, as original developer, but the Centre was now owned by the Gyle Shopping Centre Limited Partnership ("Landlord").
The lease to ASDA (the tenant under which is now Morrisons, but which I'll still call the "ASDA Lease") also let a one third share of the Shared Areas to ASDA. So this left one third unlet - in the Landlord's hands.
It was clear that the original tenants under these two long leases wanted to be sure that the rights and obligations under each lease would not be altered unless everyone agreed. Each of the M&S Lease and the ASDA Lease stated that they could not be varied without the consent of M&S, ASDA and the Landlord (or their respective successors as tenants or landlords). And each of M&S and ASDA (and successors tenants) were given express rights to enforce the provisions of the other lease against the other tenant.
A management committee was set up to deal with day to day issues at the Centre - M&S and ASDA each had one representative on that committee.
At management committee meetings in 2011, the proposal to let to Primark was raised. Plans showing the new layout, which involved the loss of about 100 parking spaces, were discussed and approved by the committee.
The Landlord then entered into a contract with Primark for the development and letting of the new store to Primark - but, before proceeding with the development, the Landlord (presumably because, in the meantime, M&S had made it clear that it wasn't happy) went to court to get a declarator that:
(1) M&S had agreed to the proposal;
(2) building the Primark store would not put the Landlord into breach of the M&S Lease; and
(3) M&S was personally barred from taking any action to prevent the development.
The Landlord had three arguments, which were:
- it was not competent to create a lease of a one third share in land as a right that would bind successor owners of the land - it was not something that would normally appear in a lease (the legal term being "inter naturalia" of a lease);
- even if such a lease of a one third share was competent and binding on successor owners, the approval by the M&S representative at the management committee meetings (as evidenced by the minutes of those meetings) was sufficient to vary the M&S Lease; and
- if it did not succeed with its first two arguments, the Landlord would then want to argue that M&S was personally barred from objecting now - as it had given its approval at the meetings and the Landlord had relied on that to its detriment.
M&S argued that:
- the letting of a one third share of the Shared Areas was competent and effective to bind successor land owners; and
- the management committee approval procedure was too informal for something of this nature - and that variation of the M&S Lease would have needed a formal document, executed by a director or other authorised signatory of M&S.
The court agreed with the M&S position. It said that:
- letting of a one third share of land was competent when it was done as an adjunct or pertinent right to a lease of land or buildings for exclusive possession - and this was not a situation involving the type of right that could be in the category of something extra (so the issue of whether or not it was "inter naturalia" of a lease did not arise);
- even if the one third share letting could be in the category of such an extra, it was something that was clearly inter naturalia of the lease and would therefore bind successor owners;
- committee meeting minutes were not sufficiently formal in content or execution to be a variation of a lease; and
- although the M&S Lease did allow variation otherwise in accordance with the lease - that did not mean that it could be varied by something dealt with by the management committee, as the function of that committee was to deal with routine management matters and not something as significant as this variation.
The Landlord's third argument, ie of M&S being personally barred from objecting now, has still to be considered - so more to come on this case.
Not an isolated incident
In this case the court have supported the M&S position, relative to a significant lease variation. The position might not be as clear cut for a more minor variation. Tenants should keep this in mind when they agree to something at a management committee or tenants' association meeting. The watchword must be, when in doubt make it clear that the tenant representative does not have the authority to bind the tenant and that formal application for consent should be made to the tenant.
Whilst it is useful to have management committees or tenants' associations for large commercial developments, their remit should be restricted to day to day management issues. They are not there to make significant changes to the rights or obligations of either landlords or tenants - not least because those who represent the tenants at such meetings tend not to be policy or decision makers within their organisations, but rather folk in management positions in the locality of the unit let.