Brexit – The legal consequences for landlords
The European Medicines Agency wants to break its 25-year lease with Canary Wharf Group as it is moving its offices from London to Amsterdam ahead of Brexit. Having only signed the lease in 2014 Canary Wharf Group, taking into account the service charge, rent and rate costs for the remaining lease term, has estimated the total value of the remaining lease to be £500 million.
European Medicines Agency are arguing that Brexit is an unforeseen event that could not have been anticipated when they entered into their lease in 2014 and therefore the lease should be frustrated (come to an end automatically) when the UK leaves the EU in March of next year. This means they will no longer have to fulfil their obligations under the lease.
Canary Wharf Group disagrees with the European Medicines Agency’s arguments and says that Brexit was foreseeable due to the existence of Article 50 of the Treaty of the European Union. Article 50 allows any member state to withdraw from the EU.
The case has raised high levels of concern amongst landlords of commercial property as if there is a ruling in favour of the European Medicines Agency other tenants are likely to adopt a similar argument. This could allow tenants to leave leases early as a result of Brexit where they otherwise would not have been able to do so. There has also been speculation that the argument could also be applied to commercial agreements which would be problematic for both the UK property market and the UK economy.
A deadline of 29 March 2019 has been set for the case hearing.
For Commercial Property advice, please contact Christopher Sykes, Head of Commercial Property.