Outer House case considering a break option in leases of office premises situated on Broadway Park in Edinburgh.

The leases were due to expire in 2023 but could be broken as at 7 May 2013. In order to exercise the break option, the tenants (Scottish & Newcastle) required to give 12 months notice and not be “in breach of any of their obligations (under the lease in question) at the date of service of such notice and/or the termination date”.

Scottish & Newcastle served break notices on time but by their own admission, at the date of service of the notices, had not fully performed their repairing obligations under the lease. The business park argued that the leases continued after the notice date and sought payment of rent from the date of the notices.

Scottish & Newcastle argued that:

1. although they had not fully performed their obligations under the lease at the date of the notices, they were not in breach of the lease as the non-performance was remediable; and
2. (even if argument 1. was wrong) for the tenants to lose their option to break they had to be in breach of the lease either:
   1. both at the date the notices were served and at the date of termination; or
   2. at the date of termination.

Lord Malcolm rejected both arguments finding that, in terms of the leases, there was no distinction to be made between non-performance of the obligations and a breach of the obligations and, with regard to the second argument, the natural meaning of the words used was that a notice was invalid if the tenants were in breach of the notice either at the date of the notice, the date of termination or both.

The full judgement is available from Scottish Courts here.

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