Landlord checks in early to claim specific performance before breach has taken place

Commercial landlords and tenants beware: obligations to build may bite before the longstop date for performance under the contract arrives. In Airport Industrial GP Ltd v Heathrow Airport Ltd & AP16 Ltd, the High Court made an anticipatory order for specific performance of construction obligations before any actual breach of contract had occurred.

In a nutshell, the lease of a site near Heathrow Airport required AP16 Ltd (the tenant) to comply with obligations contained in an agreement for lease from 1990 and a head-lease from 2005 to build a car park and provide 280 car parking spaces. The court held that AP16 Ltd was obliged to provide the 280 parking spaces by 22 October 2016.

By 2015 no carpark had been built, nor had AP16 Ltd applied for planning permission to carry out the works. The claimant (another tenant of part of the site) and first defendant, Heathrow Airport Ltd (HAL) (the landlord of the site) sought an order requiring specific performance by AP16 Ltd of its contractual obligations.

The court made an order for specific performance against AP16 Ltd, detailing the steps it needed to take to construct the carpark.

Importantly, however, the court did not make an order requiring AP16 Ltd to comply with a revised scheme proposed by the other parties (which consisted of a surface carpark that could be built by the contractual deadline). Instead the court granted AP16 Ltd an additional 2 years from the longstop date to complete a more profitable multi-storey carpark on the site. It was held that “it would be disproportionate to punish AP16 for its fault by taking from it any prospect of it being able to make some profitable use of its land.”  This was on condition that AP16 Ltd compensate HAL for the 2 year delay by way of damages.

Whilst the case is subject to an application for appeal, landlords and tenants alike should perhaps consider whether they have taken the necessary preparatory steps to comply with their contractual obligations. If the lease does not provide for adequate forfeiture/re-entry rights,  an application for specific performance may be an available remedy for a landlord seeking to take action against an inactive or uncooperative tenant unlikely to meet agreed deadlines.

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