The High Court have recently handed down judgment in the highly anticipated Canary Wharf (BP4) T1 Ltd v European Medicines Agency  EWHC 335 (Ch) case. In a blog post written in January, Shams Rahman, Partner, wrote about the issues being pleaded in the case which has highlighted the problems that landlords and tenants are encountering as a result of the UK’s decision to leave the European Union.
Following relocation to Amsterdam in January due to Brexit, the EMA has sought an early termination of its lease of premises in Canary Wharf. The lease ran to 2039 and did not have a break clause. The EMA asked the court to release it from its obligations, and principally its £500 million rent bill. The EMA claimed that Britain’s imminent departure from the EU was a frustrating event, and a change of circumstances after the lease was entered into which would fundamentally change the performance of its contract, and as such it would be unjust to force the EMA to continue to be bound by its lease.
The court held that Brexit did not constitute a frustrating event, and the EMA should have considered their lease obligations prior to deciding to relocate the organisation. The judge made clear that the two parties involved were corporate organisations who chose to negotiate the terms of the lease on the basis that the EMA was prepared to agree to a longer-term relationship, rather than agree a shorter term with a higher rent and the agreement reached should not therefore be interfered with by a court.
This judgment will be a welcome relief for landlords as it provides clarity on whether Brexit could be used by a tenant as a frustrating event, and highlights the court’s reluctance to see it as such. The case also provides guidance to those drafting and litigating on other commercial contracts. Although there have been no reported cases where a tenant has successfully terminated a lease due to frustration, there was considerable concern that if the court had allowed the EMA to remove itself from its obligations under the lease as a result of the anticipated impact of Brexit, then this would have had wide ranging and significant implications for the UK property industry.
Despite the fact the EMA are still able to ask to assign of sublet the lease, it is thought due to the significance of the sums involved and legal arguments, that the EMA are likely to appeal and we shall await the outcome of this with intrigue.
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