A recent case shows how a negotiated dilapidations settlement can alter the situation. What happened was that there was a conventional break clause. T gave the proper notice and agreed a schedule of dilapidations with L, which eventually resulted in a signed settlement agreement (with T paying a sum of money to L). But, T then overstayed and did not vacate by the correct date. L argued that the tenancy continued whilst T argued that it had been terminated. The CA found in favour of T, but for a variety of reasons – there seems to have been a clear wish on the part of the judges to find in favour of T, but there was some confusion as to what the logical justification should be.

The end result of this is a clear warning for Ls that signed dilapidations agreements should not override the strict terms of the lease. For instance, if L wants time still to be of the essence (as he normally will – so that T vacates by the particular date) then that should be specifically recorded in the settlement agreement. If it is not, as happened in this case, then the likelihood is that any minor breach by T will not be strictly construed against T (as would be the case under the original lease provisions). In short, L should ensure that the settlement agreement makes it clear that all other provisions of the lease remain in force for the time being (and for the avoidance of doubt time remains of the essence). Legal & General v Expeditors [2007] EWCA Civ 7 (source: www.practicallaw.com, subscription service). © Practical Lawyer