Could a lease be ended early due to Brexit effect?
There is still a massive amount of uncertainty surrounding Brexit and its implication for businesses in the UK. In the context of commercial leases, one interesting case is the ongoing saga between the Canary Wharf Group and the European Medicines Agency.
The European Medical Agency, the tenant of the premises in question, is arguing that its 25-year lease of its London headquarters at Canary Wharf has become "frustrated".
The European Medicines Agency is arguing that under the doctrine of frustration, they should be released from their liability under the lease as they are unable to perform their obligations under the lease due to events occurring outside their control.
The event outside its control is of course Brexit, which they are saying has "frustrated" their lease with the Canary Wharf Group.
The landlord, however, has taken the case to court, demanding £500m in unpaid rent, rates, service charges and other payments due under the lease are paid.
The landlord is also seeking a declaration so that the agency is clear that its lease obligations will not be affected by Brexit.
The landlord has argued that Brexit was not "unforeseeable" because Article 50 of the Treaty of the European Union, allowing member states to withdraw from the EU, exists.
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Lawyers instructed by the landlord have also said any ruling in favour of the tenant - i.e. a ruling which would permit the tenant to walk away from its obligations under the lease - would set a very dangerous precedent for other leases which could badly affect the property industry.
It will be interesting to find out what ruling is made. A ruling in favour of the tenant would be worrying for landlords not only in London but across Great Britain, as well as Northern Ireland.
When terminating a lease, landlords and tenants alike are advised to carefully check the term of their lease, as well as any break clauses - clauses which allow a party, usually the tenant, to terminate the lease before the expiry of the contractual term - and if the break clauses are unconditional, or if they contain conditions such as rent being paid up to the break date.
- Michael Duffy is a property solicitor in the commercial department at Worthingtons Solicitors, Belfast acting for clients with property interests in Northern Ireland, as well as in England and Wales. He can be contacted on 028 9043 4015, or at email@example.com