In this podcast, Herbert Smith Freehills’ Matthew Bonye and Tom Leech QC discuss the important Canary Wharf Group v European Medicines Agency court case. This case is highly relevant to real estate development. The tenant, the European Medicines Agency (EMA), argues that Brexit is a frustrating event for its lease and that it can assert that the lease is thereby terminated. If EMA wins, then it can only be on the basis that the law of frustration is considerably wider than it is currently thought to be: until now, there is no English case where a lease has ended due to frustration. If a lease can come to an end due to frustration, then how will this affect investment values and therefore development appraisals, particularly for longer-term commercial leases such as those for anchor tenants or whole building lets to major banks and other institutions, often a key element of a development scheme? Matthew Bonye and Tom Leech QC discuss how the law of frustration has developed and whether this may open the floodgates for other claims by tenants where the parties have not legislated in their lease for an unexpected turn of events in the future.
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Author: Stephanie Trompeter, Senior Associate, Real Estate Dispute Resolution, London
In this post I am writing about the court's approach to a new business tenancy where the parties cannot agree on the terms of a renewal lease with a landlord's break right. The court will need to consider the existing lease and will also need to weigh up allowing the landlord to redevelop the premises and the tenant's security of tenure.
By way of background, a tenant of a business lease has a statutory right to a new lease at the end of the contractual term, if it satisfies certain criteria under the Landlord and Tenant Act 1954 (the 1954 Act). It is open to the parties to agree the terms of the renewal lease but if the parties cannot reach agreement, either the landlord or tenant must apply to court, and the court will determine the terms of the new lease.
The focus of this piece is a scenario in which the tenant's existing lease does not contain a landlord's break clause, but the landlord needs one in the renewal lease so that he has the option to redevelop during the term of the new lease. The question is whether the courts would order a landlord's break clause in these circumstances.
The Supreme Court unanimously rules that, in the absence of express wording in the lease, Marks and Spencer is not entitled to an apportioned refund of rent and other charges after it had exercised a break clause in its lease
The Supreme Court has today (2 December 2015) handed down its long-awaited judgment in the showdown between Marks & Spencer (M&S) and its former landlord of head office premises in Paddington. The question was whether, absent express wording, M&S could claw back around £1.1m in apportioned rent and other charges, after it had exercised a break clause in its lease which took effect part-way through a rent quarter.
The Supreme Court has now definitively confirmed, much to the relief of landlords across the country, that particularly where the parties have entered into a full and professionally drafted lease, it would be wrong for the Court to attribute to a landlord and a tenant an intention that the tenant should receive an apportioned part of the rent payable and paid in advance.
1. Re-cap of the story up to today …
2. Issues for the Supreme Court's consideration
3. The Supreme Court's judgment in detail
4. Practical pointers