In the recent case of Mears Ltd v Costplan Services (South East) Ltd and others (29 March 2019), some particularly interesting points were considered by the Court of Appeal in relation to a dispute arising in connection with the provision of student accommodation in Plymouth:
Agreement for Lease: the Court of Appeal held whilst the building contract provided that it was a breach of contract to build rooms that were more than 3% smaller than those stipulated in the drawings in the Agreement for Lease, building them more than 3% smaller was held not to be a material breach of contract that entitled Mears to terminate the Agreement for Lease, as it was not specified in the Agreement for Lease to have this consequence. The Court noted that it would be commercially unworkable if every departure from the contract drawings entitled a party to terminate an agreement for lease. One takes from this that consideration should be given by the parties as to what breaches justify termination of an agreement for lease and then stating this in the agreement for lease.
Practical completion (PC): Coulson J held that unless there is a definition for PC in the contract it is up to the party certifying PC whether it has been achieved or not. The Court acknowledged that PC is much easier to recognise that define but held that:
- The fact that a property is habitable does not mean in itself that PC has been achieved
- A defect which is considered to be more than “trifling” will prevent PC regardless of whether or not it can be remedied
- A defect which is considered to be “trifling” will not prevent PC but may result in a claim for damages
- The fact that a defect cannot be remedied does not in itself mean that PC cannot be achieved.
In regards to point 4, the Court referred to the well-known case of Ruxley v Forsythe (1996) relating to the swimming pool which could not be dived into and yet PC was achieved.
Food for thought for those involved in negotiating agreements for lease and drafting/entering into building contracts as well as those who certify PC.