Court of Appeal Judgement in Pretoria Energy Company (Chittering) LTD v Blankney [2023] EWCA Civ 482

The Court of Appeal dismissed the appeal and held that the Heads of Terms (‘HoT’) of a proposed agreement signed by both parties was not a binding agreement for a commercial lease.

The start date of the commercial lease in the HoT Proposed Agreement was uncertain and therefore it was not a binding agreement.

Facts

  • An energy company appealed a decision made by the trial judge that it had not entered into a binding lease agreement with a landowner

  • The parties signed the “HoT of Proposed Agreement” in 2013

  • The HoT allowed for a 25-year lease of the land

  • The HoT stated a formal agreement would be drawn up within 1 month of planning permission being granted

  • A lockout agreement prevented either side from third party negations before 31 July 2014

  • Following expiry of the exclusivity period, the landowner finalised arrangements with a third party

  • The landowner did not grant a lease to the energy company

  • The energy company brought proceedings against landowner arguing that the HoT included a binding agreement for lease

  • It was held that the HoT did not include a binding agreement

Law

  • A binding 25-year lease agreement was incompatible with short lock-out agreement

  • HoT anticipated lease would contract out of the Landlord and Teant Act 1954. Notice process had to be carried out by landlord before tenant contractually bound

  • For a 25-year commercial lease of an unusual property important terms were not addressed i.e. would plant remain at end of lease

Importantly, Lord Justice Lewison at para 57 of the judgment held that:

“The time from which the term of a lease is to begin is, in my judgment, a term that the law regards as essential to the creation of a binding contract for lease. Thus, even where it is plain that the parties intended to enter into a binding contract for lease, if the time from which the lease is to begin is uncertain, the agreement is incomplete; and there is no binding contract. By the same token, if the start date for the term of the lease is uncertain, it is a very powerful objective indicator that the parties did not intend to be bound.”

Takeaway

The start date for a commercial lease is essential for a binding lease agreement even if there is an obvious intention between parties to enter into a binding agreement.

To read the full judgment click the below link https://caselaw.nationalarchives.gov.uk/ewca/civ/2023/482

The contents of this post do not constitute legal advice and are provided for general information purposes only.

The contents of this post do not constitute legal advice and are provided for general information purposes only ■