Following the High Court’s decision against the European Medicines Agency, Julian Joseph, real estate partner at law firm, Shakespeare Martineau, said:
“It was a bold move by the EMA to attempt to use a Brexit ‘frustration’ clause as a reason for early release from its pricey lease. However, the judge’s decision is unsurprising and sends a clear message to the commercial rental market that lease conditions and terms are there to be adhered to.
“Even the EMA’s unusually-long 25-year lease and impending move to the Netherlands was not sufficient to successfully invoke a ‘frustration’ clause. Had the organisation been successful, it would have been a milestone moment for UK real estate as until now, there have been no reported decisions in relation to the doctrine of the frustration to leases.
“The EMA’s situation is not unique and commercial tenants up and down the country are feeling the bite of tough trading conditions and the looming arrival of Brexit. Being wise about the terms and durations of leases is key and businesses should only lock themselves into agreements which will be financially viable in future – as hard as that may be.
“For the moment, it appears that the barrage of court cases that would have been caused by the EMA’s victory have been stemmed. Commercial landlords in particular will be breathing a sigh of relief that their rental incomes are protected and their tenants secure, for the moment at least.
“Had the EMA been successful, lenders and investment values would have been affected, with an adverse decision increasing downwards pressure on valuations in an already volatile real estate market.