Taylor & Anor v Crotty & Anor

A contractual option is effectively exercised where the tenant gives unequivocal written notice pursuant to the option clause within the stipulated period. A notice need not repeat every temporal detail where its reference to the clause makes its nature and effect clear.

Steps stipulated after exercise, such as supplying an unconditional contract and paying a deposit, are not conditions precedent unless the clause makes them conditions of exercise. They may instead be consequential machinery for completing the already binding contract.

Specific performance is not ordinarily refused for delay caused by the vendor’s denial of the contract, particularly where no resulting prejudice is shown. Until the tenancy is terminated, however, the tenant remains liable for contractual rent notwithstanding the uncompleted sale.

The landlords granted the respondents a five-year tenancy of Valley Stables. Clause 8 gave the tenants an option to purchase the freehold for £55,000 if, during the first two years of the term, they gave the landlords three months’ written notice.

The tenants’ solicitors gave written notice pursuant to clause 8, but did not expressly mention the three-month period or provide the further contract and deposit. The landlords denied that the option had been validly exercised and later commenced possession and rent-arrears proceedings. The tenants counterclaimed for specific performance.

HHJ Langan QC in Leeds County Court ordered specific performance. The landlords appealed, challenging the exercise of the option, the grant of specific performance, and the terms concerning rent and interest.

1. The appeal was dismissed, subject to a variation of the terms of specific performance concerning rent and interest.

2. The notice of 16 August 2002 validly exercised the option. It expressly stated that it was given pursuant to clause 8. That reference incorporated the clause’s requirement of three months’ notice and left the landlords in no reasonable doubt about the notice’s nature or purpose. Express repetition of the three-month period was unnecessary.

3. The first-two-years limitation governed the giving of notice to exercise the option. Once that notice was served, a binding contract arose. The later requirements to supply an unconditional contract, pay a deposit, obtain the landlord’s counterpart, and complete were consequential conveyancing machinery. They were not conditions precedent to the formation or valid exercise of the option. Clause 8 did not require those later steps, including completion, to occur within the first two years.

4. Specific performance was properly granted. The landlords identified no prejudice or equitable consideration warranting refusal. They had denied that a valid contract existed from the outset and could not rely on delay in completion caused by that stance. They could have protected their position by making time of the essence.

5. The judge’s provisions substituting interest on the purchase price for rent after 14 January 2003 were wrong. The tenants had not supplied the required contract, and neither party had terminated the tenancy. Their possession therefore remained referable to the tenancy agreement, with its continuing contractual obligation to pay rent. Paragraphs (d)(i) and (d)(ii) of the order were to be replaced so that rent remained payable through the period allowed for the landlord to execute the contract.

• Court of Appeal (Civil Division): Dismissed the landlords’ appeal, while varying the specific-performance order so that rent, rather than interest on the purchase price, remained payable during the relevant period.
• Leeds County Court: HHJ Langan QC ordered specific performance of the option agreement on the tenants’ counterclaim in the landlords’ possession proceedings.