Skip to main content
CLOSE

Charities

Close

Corporate and Commercial

Close

Employment and Immigration

Close

Fraud and Investigations

Close

Individuals

Close

Litigation

Close

Planning, Infrastructure and Regeneration

Close

Public Law

Close

Real Estate

Close

Restructuring and Insolvency

Close

Energy

Close

Entrepreneurs

Close

Private Wealth

Close

Real Estate

Close

Tech and Innovation

Close

Transport and Infrastructure

Close
Home / News and Insights / Blogs / Real Estate / 161: Brexit cannot frustrate a commercial lease – High Court ruling

A landlord has won its High Court case against the European Medicines Agency’s confirming that its 25-year lease of premises in Canary Wharf will not be frustrated after BREXIT. Losing this case would have seen the landlord, Canary Wharf Group, miss out on up to £500 million in rent as well as opening potential floodgates to other similar cases.

As mentioned in our previous blog, the EMA sought to terminate its 25 year lease of commercial premises as it now needs to relocate its headquarters to Amsterdam after BREXIT. It argued that when the parties negotiated the Canary Wharf lease back in 2011, neither party expected the UK to withdraw from the EU. Canary Wharf Group sought a declaration prior to BREXIT that the EMA would be obliged to continue to pay rent and comply with all its covenants in the commercial lease.

The EMA’s main argument was that the UK’s departure from the EU would ‘frustrate’ its lease. It maintained that it would no longer be lawful for it to pay the rent after the UK leaves the EU because it would be ultra vires to have its HQ in a non-EU country. A contract may be discharged on the ground of frustration when something occurs after the formation of the contract that has rendered it physically or commercially impossible to be fulfilled.

Mr Justice Marcus Smith has now rejected this argument on the ground that the EMA would still have capacity to deal with property in a non-EU country and have capacity to continue performing its obligations under the commercial lease. The court did acknowledge that the EMA was obliged by a 2018 EU regulation to move its headquarters to Amsterdam, and that there were strong political reasons for the EMA not to remain in the UK after Brexit. However, this was not enough to frustrate the contract.

The EMA’s other argument was that the lease should be discharged due to frustration of a common purpose. The court rejected this because there was no common purpose outside the lease. The parties had different purposes. The landlord’s purpose was long-term cash flow at the highest rent and a preparedness to allow the EMA to have a say in the building’s original fit-out provided that this was not adverse to the landlord’s interests. The EMA’s purpose was for bespoke HQ premises in Canary Wharf, flexibility on the term and paying the lowest possible rent.

Given the large amount of rent involved, it looks likely that the EMA will appeal against this judgment before the end of March 2019 and will go directly to the Supreme Court.

Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch) (20 February 2019) (Smith J).

Related Articles

Our Offices

London
One Bartholomew Close
London
EC1A 7BL

Cambridge
50/60 Station Road
Cambridge
CB1 2JH

Reading
The Anchorage, 34 Bridge Street
Reading RG1 2LU

Southampton
Grosvenor House, Grosvenor Square
Southampton SO15 2BE

 

Reading
The Anchorage, 34 Bridge Street
Reading RG1 2LU

Southampton
Grosvenor House, Grosvenor Square
Southampton SO15 2BE

  • Lexcel
  • CYBER ESSENTIALS PLUS

© BDB Pitmans 2024. One Bartholomew Close, London EC1A 7BL - T +44 (0)345 222 9222

Our Services

Charities chevron
Corporate and Commercial chevron
Employment and Immigration chevron
Fraud and Investigations chevron
Individuals chevron
Litigation chevron
Planning, Infrastructure and Regeneration chevron
Public Law chevron
Real Estate chevron
Restructuring and Insolvency chevron

Sectors and Groups

Private Wealth chevron
Real Estate chevron
Transport and Infrastructure chevron