Legal update – High Court finds lease not frustrated by Brexit

1 March 2019

On Wednesday 27th February 2019, the High Court held that the European Medicines Agency's (EMA's) lease of premises in Canary Wharf was not frustrated by Brexit.

The EMA's main argument was that as an agency of the European Union, it was not legally able to be located outside of the European Union, which the UK would not be part of post-Brexit. This would mean that neither the EMA nor any other EU agency would be able to use the premises that it currently leases and occupies.

The doctrine of frustration of leases has generally been very narrowly interpreted by the Courts previously. In a case such as this, which appeared to have a strong basis for success, it had the potential to make big changes. However, confining himself to the specific case and the specific lease in question, Mr Justice Marcus Smith concluded that the lease was not frustrated either by Brexit itself or by the EMA having a European law obligation to move its headquarters to an EU Member State.

In considering the facts before him, Mr Justice Smith found that the premises themselves had been adapted for EMA's use; they had received an inducement for entering into the lease; there were no break rights contained in the lease; and the lease contained generous provisions allowing the EMA to assign and sub-let the lease. The EMA are therefore able in this specific instance to use their rights of assignment or sub-letting to find an alternative solution.

While Mr Justice Smith did not in any way confirm that Brexit was not capable of frustrating a lease, his decision could be interpreted politically as an attempt to try and dispel any concern that the office market in London may face difficulties post Brexit. As lawyers we are aware of how difficult it is to succeed in an argument that a lease has been frustrated, so this is not a surprising decision. Nevertheless seeing as the rent payable over the rest of the term of the lease supposedly amounts to in excess of £500m it is likely that the EMA's lawyers are currently hard at work preparing their appeal and this is a case that could easily find itself in the Supreme Court later this year.

At Gepp Solicitors we are well equipped to assist both landlords and tenants in all issues relating to leases. If you require assistance at any point before, during or after the life-time of a lease, do not hesitate to get in touch with our Commercial Property or Dispute Resolution teams who will be pleased to help.

For further information please contact us on 01245 493939.

This is not legal advice; it is intended to provide information of general interest about current legal issues.