Case Study

Is Brexit grounds for terminating a lease early?

31st January 2019

Is Brexit grounds for terminating a lease early?

A multi-million pound case currently being heard in the High Court, is citing Brexit as the reason behind the early termination of a lease in London’s flagship Canary Wharf.

The outcome of the hearing could alter the entire landlord and tenant landscape more than any other decision in recent times.

In Canary Wharf v European Medicines Agency (EMA), the high court is being asked to decide whether Brexit triggers the rarely actioned contract law doctrine of “frustration”, a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the principal purpose for entering into the contract.

Tenant EMA is arguing that Brexit has fundamentally and radically changed the requirement for it to perform its obligations under its £13m-a-year lease of premises at Canary that began in 2011 and doesn’t expire until 2039 – with no break clause. EMA claim that Brexit was not a reasonably foreseeable event in 2011.

Landlord Canary Wharf has brought the case to court, asking for a ruling that EMA cannot argue that its lease has been “frustrated” (terminated) based on the UK’s exit from the European Union.

If EMA win, it would cost Canary Wharf £246m in lost earnings.

Nyree Applegarth from Higgs’ Property Litigation team says: “Clearly, if EMA succeed the floodgates will be opened for other tenants to raise similar arguments, and most likely swamp the already struggling courts for the next few years.

“It is hard to imagine that the tenant will succeed – although the only certainty we have in these uncertain times, is that the unlikely is very likely!”

The case is currently being heard and judgment is expected to be reserved.

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If you would like more information on the topics discussed in this article contact Nyree Applegarth or call 0345 111 5050.

 

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