Unilateral Mistake - High Court Rectifies Terms of Commercial Lease
Signing leases is a serious business and both landlords and tenants are expected to live with their terms, however onerous they may be. However, as a High Court case illustrated, judges have the power to rectify terms if an obvious mistake has been made.
A retailer and a property company had conducted long and detailed negotiations in respect of a proposed lease of commercial premises. Various draft leases had passed between them and it had been agreed in principle that the retailer would pay 50 per cent of the rent for the first three years of a 20-year term and that there would be five-yearly rent reviews, fixed at 2.5 per cent (the initial rent and rent review clauses). However, in the lease that was eventually completed, the initial rent clause had been deleted and an entirely new rent review provision inserted.
After the retailer launched proceedings, the Court noted that its representative had been driving his car in France when he agreed completion terms on the phone. He had relied on the property company's representative, whom he trusted, to talk him through any significant changes to a previous draft of the lease. The Court, however, found that the representative had not drawn his attention to the amendments to the initial rent and rent review clauses.
In the context of a lease the small financial details of which had been closely negotiated, the only explanation for a lack of outcry on the retailer's part was that neither its senior management nor its representative had noticed the changes. The Court reached the unattractive, but inescapable, conclusion that the property company's representative knew, or at least suspected, that a unilateral mistake had been made but had decided to take advantage of the situation. In those circumstances, the Court ordered rectification of the lease so as to reflect the initial rent and rent review terms that had previously been agreed.