In Wigan Borough Council v Scullindale Global Ltd [2021] EWHC 779 (Ch) the High Court has determined that a break option under a long lease had been validly exercised where the developer failed to complete its development on time.
Wigan Council granted a long lease of Haigh Hall country home and gardens to a developer, Scullindale, to convert the Hall into a hotel. The lease contained a break option whereby if stated milestones were not met (which included completing the development prior to 23 May 2018), the Council could terminate the lease at any time by serving a break notice. 16 months after the milestone, the Council issued a break notice on 19 September 2019 to terminate the lease 2 months later.
The Judge ruled that:
- A term could be implied into the lease that a valid break notice could only be served "at any time whilst an Event of Default persists" to give business efficacy to the lease and avoid an open-ended break option.
- As Scullindale failed to complete the development by 23 May 2018 and still had not completed by the time Wigan Council served the notice, and Scullindale failed to persuade the Judge that the reasons for the delay were due to the Council, the break notice was held to be effective in terminating the lease.
- Having validly exercised the break option, pursuant to the lease terms the Council was liable to pay Scullindale compensation for the open market value of Haigh Hall.
- The Council's claim for mesne profits and damages for trespass was dismissed, on the basis that the Covid-19 pandemic meant that the Council could not have re-let the property as a hotel venue and therefore had suffered no financial loss.
For followers of Wigan Warriors, the Judge's final score was 20-6 to the Council. For followers of the Latics (Wigan Athletic FC) the score was 4-1. For the neutrals, the case offers support for the view that a break clause contained in a long lease that is triggered by default of the tenant can be exercised on its terms, without the tenant being entitled to apply for relief from forfeiture.
