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High Court rules against lease frustration

Whilst many in Britain are becoming frustrated with Brexit, the High Court has recently rejected a claim by the European Medicines Agency (EMA) that Brexit was grounds for lease frustration - a result which has been welcomed by the property industry.

The European Medicines Agency (EMA), a medicines regulator responsible for authorising and monitoring medicines in the EU, had argued that the lease on its Canary Wharf HQ had been ‘frustrated’ by Britain’s impending departure from the EU.  It claimed that Brexit was an unforeseeable event which, because of the extent to which it is intertwined with EU institutions and member states, frustrated the 25 year lease which it entered into in 2014.  And that as a result of Article 50 being invoked, relocated to Amsterdam.

Samantha Jones, an Associate Director of Prop-Search, in explaining lease frustration said: “Frustration is a legal doctrine which renders a contract incapable of being performed due to an unforeseen event - after the contract has been entered into - resulting in the obligations under the contract being radically different from those that were contemplated by the parties.  Frustration ends the contract with immediate effect.”

The claimant landlord, Canary Wharf Group (CWG), disagreed with EMA’s interpretation of frustration and to avoid uncertainly, commenced proceedings seeking a declaration from the Court that the lease was not frustrated by Brexit.

Mr Justice Marcus Smith upheld the landlord’s views and in his judgement concluded that EMA’s lease would not be frustrated by Brexit, since the EMA would enjoy continued powers until 2039 to assign or sub-let the premises - even if it would not enjoy those powers under EU law that made no difference to the English law analysis - and any frustration would have been self-induced by the EMA in any event.”

Samantha Jones added: “In summing up, the Judge concluded that the EMA remained obliged to perform its obligations under the lease - a decision that came as a welcome reassurance to commercial landlords of property leased to European tenants.”

“However landlords can only breathe a small sigh of relief as subsequently the EMA has been granted permission to appeal the High Court’s decision.  The case will now be heard by the Court of Appeal with a date scheduled for March 2020.”

Further information or advice can be obtained from Prop-Search - Tel: 01933 223300 / 01604 492000 or its website: www.prop-search.com


30 May 2019