Can a Tenant Get Out of a Commercial Lease Because of Brexit?

A key event to tune into is the ongoing dispute between the Canary Wharf Group (“CWG”) and the European Medicines Agency (“EMA”) concerning the impact of Brexit on EMA’s 25-year lease with CWG of a commercial property in Canary Wharf. The lease expires in March 2039 and the current rent is understood to be £12 million per annum.

The EMA will be moving from London to Amsterdam because of Brexit. Consequently, it is seeking to get out of its lease with the CWG by arguing that Brexit was an unforeseen event which would undermine the lease’s purpose thereby ‘frustrating’ the agreement, making it terminable by law.

An agreement can be ‘frustrated’ if an event occurs which renders a contract physically or commercially impossible to fulfil. This may include an unforeseen event such as a change of law which makes the agreement illegal to uphold. In practice, arguing that an unforeseen event is sufficient to defeat the purpose of an agreement can be extremely difficult.

As landlord, the CWG are seeking a declaration that the UK’s withdrawal from the EU and/or the relocation of the EMA will not cause the lease between the parties to be frustrated so that the EMA will continue to be bound by all of its covenants and obligations in the lease.

If the EMA is successful, the case could set precedent for tenants all over the UK to terminate their lease agreements on the grounds of Brexit which would, undoubtably, pose substantial threat to the UK’s commercial property industry.

The trial is listed for today (16th January 2019) – Canary Wharf (BP4) T1 Limited and others v European Medicines Agency, High Court of Justice, Business and Property Courts, Case No. PT-2018-000505.


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