A tenant occupying under a commercial lease protected by the Landlord and Tenant Act 1954 (“the 1954 Act”) is entitled to seek a new lease upon expiry of the current term pursuant to the 1954 Act. The landlord may either oppose the request for a new tenancy on certain grounds, or it may be unopposed with the terms to be agreed.
Most commercial lease renewals are agreed amicably between the parties, but if that is not possible, then an application to the court can be made to determine the disputed terms of the new lease. The starting position is that the new lease will be granted on similar terms to the existing lease, subject to modernisation.
In a recent county court case of Ministry of Sound Ltd -v- The British and Foreign Wharf Company Ltd and Others [2025], the court was required to determine a number of contested terms of the new lease. Of particular interest was the rolling redevelopment break clause that the landlord was seeking in the new lease.
When the courts are required to determine the introduction of a new lease clause, they are undertaking an exercise to balance the competing interests between the landlord and tenant.
Background
The Ministry of Sound (“MOS”) claimed a new business tenancy of the premises at 103/105 Gaunt Street, London SE1 6DP (“the Property”) pursuant to the 1954 Act.
The MOS have been occupying the Property for over 30 years, and it will be well known to all as a nightclub and music venue. The current lease dated 23 March 2011 was for a term of 15 years beginning on 29 September 2009. As permitted under the 1954 Act, MOS served a Section 26 Notice upon the landlord seeking to renew their lease upon expiry of the current term. A number of terms remained in dispute, so MOS issued court proceedings to seek the court’s determination of the disputed lease terms.
A term that caused much consideration in the case was that the landlord sought a rolling redevelopment break on not less than 9 months’ written notice exercisable to expire no earlier than 30 June 2028.
MOS opposed the redevelopment break clause on the basis that they considered the redevelopment prospects were low and would have a significant impact on its business. MOS defended the inclusion of this clause on grounds that it would destabilise business operations and deter investment.
MOS alleged that the potential for redevelopment or reconstruction of the site including the Property faced significant challenges and argued that the history of the site and Property for development in the future was unlikely. MOS argued that in the past, whilst there had been many interested parties looking to invest, since around 2019 there was no scheme which would have involved redevelopment of the Property which had been brought to the planning authorities for approval.
The landlord acknowledged that there were significant challenges with any plans for redevelopment of the site which would include the Property. The landlord argued, however, that solutions were feasible and submitted that there was at least a “real possibility” of development during the term of the proposed new lease.
Decision
Following a 5 day trial, the court found in favour of the landlord’s request for the new lease to contain the rolling redevelopment break option.
The basis for the decision of the court in finding in favour of the landlord on this clause, was that they considered there to be a “real possibility” of redevelopment during the term. The court undertook the balancing exercise in considering both the landlord and tenant positions in relation to the inclusion of a redevelopment break clause and, whilst they acknowledged it would increase the administrative burdens upon MOS, they did not accept that it would make MOS’s business untenable nor did it agree it would be destabilising. As such they would exercise their discretion.
It is useful to note that the court did not consider the expert evidence put forward by MOS was sufficient to prove there would be a prejudicial impact on their operational activities or finances by the inclusion of this clause.
Points to consider
The court will have to undertake a balancing exercise in any commercial lease renewal pursuant to the 1954 Act when considering both the landlord and tenant’s conflicting interests. The court has concluded in previous cases that the 1954 Act is not intended to stand in the way of proposed reconstruction or redevelopment of commercial property if there is a real possibility that redevelopment could take place during the term of the lease.
Landlords and tenants considering commercial lease renewals and who are in dispute over whether there should be a redevelopment break clause will find this case of assistance in understanding how the court may approach determining the inclusion of such a clause.
The court will seek to be fair and reasonable and proportionately balance the competing commercial interests of the parties to include the rolling redevelopment clause. The inclusion of the clause can result in a recognised adjustment to the new rent for the uncertainty caused by such a clause.
For any tenant seeking to defend the inclusion of this type of clause, impartial expert evidence is key as was highlighted in this case.
If you require assistance in relation to commercial lease renewals, please contact us on 0345 646 0406.