Commercial lease break – pre-emptive strike!

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Real Estate legal experts Taylor Wessing report on Royal Mail's request for guidance on a forthcoming lease break and its importance;-

In light of the recent Court decisions on break clauses that have gone against tenants (please see TW's article on the M&S break litigation),  another FTSE 100 tenant, Royal Mail, has now decided to take a pre-emptive strike (Royal Mail Group Ltd v Airport Industrial GP Ltd and another). In November 2003 Royal Mail took a lease of the London Air Mail Unit at London Heathrow Airport, which provided for a conditional tenant's option to terminate the lease on 25 February 2015, the tenth anniversary of the rent commencement date. Royal Mail decided to exercise this break right and served a break notice on its landlords on 23 April 2014. Royal Mail has applied to Court for guidance as to the requirements of its lease where it is in dispute with the landlord over the exact requirements of the break option, and the break date has not yet arrived.

Royal Mail is seeking a number of declarations from the High Court, including:

the sum it must pay as a condition of the break;

whether payment can be made ahead of time or must be "on the break date";

whether reinstatement and vacant possession are preconditions; and

whether a full quarter's rent of £461,865 plus VAT, due on 1 January 2015, must be paid in full to break the lease.

Royal Mail has taken the unusual step of making a pre-emptive application to the Court before the break date – rather than afterwards. Whilst the requirements of the lease will be unique to this case, it is a sign of the recent times that a tenant has taken this course of action, and it will also give useful guidance as to how the Court is likely to treat such applications and such clauses.

Taylor Wessing are expecting to report on the outcome of the case later this year.

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