The main overarching issue is to advise Her’s Majesty Government on methods
on how EMA can lessen its responsibility for payment of rent after its relocation
to EU as UK had recently decided to withdraw from EU. This has raised complication
and disagreement between the parties involved which are EMA who is a tenant;
Wivenhoe Ltd to be a landlord and Her’s Majesty Government who is representing EMA.
Therefore, the first question is to identify whether UK is liable for
the remaining payment of rent as EU’s monetary repercussion resulted by the withdrawal
is being held accountable by the UK as agreed on the facts. Primarily, we need
to determine whether is there a lease being established. The facts above clearly
shown that it has met the requirement laid down by Lord Templeman in Street
v Mountford1 as of the conferring
of exclusive possession for a specific time duration for a certain rent to be
paid where EMA has rent the office block for a duration of 25 years with the
annual payment rent of £24,000,000. Moreover, the prerequisite of a valid
leasehold under s.52(1) LPA 19252
where ‘conveyance must be made by deed’ had been satisfied as stated that it is
a properly executed and registered lease. In addition, we can recommend UK to
sign a guarantee agreement in order for UK to be held responsible for EU’s remittance.3
However, this cannot be applied as there is no evidence that UK will be liable
to EU as upon having a drafted and signed covenant between parties will have EU
being assured for the transfer of liability for UK to be bound on the financial
liability faced by EU.
After lease being established, we need to advise Her’s Majesty
Government on ways to curtail EMA’s responsibility on the payment of rent. A
significant breach of any term agreed in the lease should be pointed out in
pursuant to minimize the rent. First and foremost, assignment can be suggested
to be done by the tenant. This involved the transferring of the entire or portion
of the leasehold by a tenant (assignor) to another party (assignee).4
The formalities of s.52(1) LPA 1925 and s.4 LRA 2002 of being a registered
lease if it is more than 7 years is being fulfilled to be recognized as a
registered leasehold as the facts shown that the lease is 25 years. By
assignment, the tenant will cease every association with the lease and becomes a
complete outsider at last.5
Moreover, the facts presented a lease which comprises an absolute covenant against
assigning of demised premises as no term of consent is stated in the lease. A
straightforward proscription consists in this absolute covenant where by any
words in requiring the assent of the landlord will not be empowered.6
This merely enabled the consent in all occurrences which is withhold by the
landlord and to impose what condition he favors.7
No statute on implied term for consent to be granted for assignment if it has
been prohibited. However, assignment is still valid even there is a breach in
Therefore, landlord will be granted several remedies for tenant’s breach
of covenant. Damages may not be useful since assignee ended up occupying the
demised premised and landlord will not choose forfeiture for the covenant to be
void as his aim is to get back his payment of rent. He may choose an injunction
to stop tenant from assigning. According to the facts, there is an alienation
clause in opposition to the lease being assigned by the tenant. Hence, if UK
were to assign the lease in breach of covenant as agreed, the assignment will
be held as excluded assignment and no effect to be taken upon and merely the
subsequent assignment of an excluded assignment can execute as of
s.11(1)&(2) of LCTA 1995.9 Thence, UK is still liable of EU as the lease
is not being transferred.
Furthermore, another alternative we can suggest is by subletting where
the tenant retains his own lease(head lease) and create a new lease(sublease) for
a 3rd party when he sublets. This will not breach the covenant as
there is no specified clause that forbid subletting in the lease. Sublease will
have a shorter term than head lease and no recognition of privity of estate
between tenant and sublessee in law.10
With regards to it, Wivenhoe can accept a sublease to be enforceable even
though the tenant forfeits the head lease.11
Moreover, this will bring about the essential of having an agreed covenant to
be executed for rent payment as landlord wish to have capability to supervise
the identity of sub-tenant.12
The head lease will generally entail the consent of the landlord before
subleasing the demised property. However, tenant will sustain responsibility of
losses if he fails to acquire consent from the landlord.13
According to the facts, there is no statement showing that consent should be
Despite that, s.19(1) LTA 192714
allow the subletting of lease if consent is being granted by the landlord as of
the covenant must be render subjected that consent should not be unreasonably
this section allows the tenant to seek consent, but a breach will be
established if the tenant insists to continue without seeking consent.16
Plus, we need to identify what amount to unreasonable withholding of consent. A
denial of consent by the landlord will be deemed unreasonable where no
impairment will arise as of International Drilling Fluids v Louisville17.
However, Norwich v Shopmoor18
had shown consent to be unreasonably withheld where landlord refused consent on
the basis for the benefit to himself whereby the underlease is lower than the
market value when subletting.19
As to the facts, landlord cannot unreasonably withheld consent but he will try
to argue in contrary as he can reasonably withheld consent with the reason of repayment
of rent by tenant and not willing to rent to his challengers, Greenstead
Property Ltd as there is an obvious breach in the covenant by EMA giving up the
ownership halfway before the term of lease end. Besides, EMA can overrule the verdict
by appealing to the Leasehold Valuation Tribunal if EMA think it is
unreasonable not to grant consent by the landlord.20
Nevertheless, if we assumed consent is obtained, then sublease will act as a
reflector to the head lease in order to lessen any forthcoming responsibility
of UK and landlord can reconsider for Greenstead as a sublease to cover the
rent after 25 March 2019.
Moreover, the term of the sublease must be no less than one day earlier
than head lease, if not will amount to an assignment where EMA will be liable
for breach of covenant.21
This is shown in Allied Dunbar Pension v Baker22
where assignment is formed in which landlord misinterpreted the outcome of a
concurrent expiry of headlease and not to rectify as a sublease irrespective of
the parties’ intention.23
In addition, is there any possible way to minimize the rent regarding the
above matter on UK owing the outstanding rent after tenant vacate the premises
and stop paying rent. The court had extent liability to this issue of rent
arrears. As the case of Reichman v Beveridge 24,
landlord has no obligation to mitigate the loss as demanding for upcoming
rent cannot be accepted because tenant cannot expect the landlord to look for
new tenant.25 This
case is in contrast with the common way towards implementing contractual
COA in Highways Properties Ltd v Kelly27
brought about 3 means to claim rents after tenant forsake the premises
which are landlord doing nothing and sue the tenant for rent; or preserve the
right to sue after ceasing the lease; or re-let the property to a prospective
tenant. Unfortunately, there is no precedent regarding on this rent arrears
issue found in Supreme Court. Notwithstanding that Reichman v Beveridge
is a good case but there is a chance to fight to Supreme Court even
though it is difficult to overturn the decision. As of the facts, Wivenhoe Ltd can
choose the above 3 options ie. sue the tenant, terminate the lease or re-let
the demised premises to claim for the rent. It is clear that they chose to sue
EMA as they want to retain the rental responsibility of EMA until the last date
of the lease term as agreed. Undoubtedly, Wivenhoe Ltd has no duty to look for
a new tenant and even if there is one tenant who is willing to rent, they have
the right to choose not to, not to mention that Greenstead is one of their competitors.
Hence, UK will be liable for the outstanding rent.
However, there is a chance to mitigate the loss if he breaks the duty by
re-letting the premises to another tenant. Walls v Atcheson28
held that tenant’s responsibility to pay rent will terminate on forfeiture.29
Moreover, Gray v Owen30
supported the idea whereby the only way to end the lease is when one side of
the parties is operating under a mistake to give up the possession of the
property, henceforth no future rent can be claimed if landlord accept it.31
On that account, landlord must give a 7 days’ notice for implementation before
taking action if tenancy terminates without prior notice and left with overdue
rent. However, if Wivenhoe Ltd were to change his mind and re-let the property
to Greenstead since they concerned on the property and eager to rent it for the
present market rent, then it will result in the lease being surrendered and therefore
UK will not be liable for the future rent.
Furthermore, the next issue to be distinguished is the re-evaluation of
rent. According to the lease agreement, the payment of rent must be revised at each
anniversary of the term which is 24 of June for each year. In spite of that,
the facts shown that EMA gave up the possession of the property which means they
intend to terminate the lease at the date of 25 March 2019. Therefore, the rental
from March to June for 2019 will carry on being the same and unrevised as to
the initial amount where EMA had agreed upon on the annual rent to be paid on
each quarter day. Henceforth, in order to minimize the remaining rent, EMA can forward
a notice to the landlord in regard to the payment of rent for the next term
which is from 24 June 2019 to be revised.
Moreover, the lease is effective from 24 June 2012 to 23 June 2037. Due
to the facts that EMA terminates the lease 18 years before the dateline, consequently
UK will be liable for the future leftover rents and this should be assessed and
revised by an independent assessor. The valuer will use the open market rent
review when assessing as this will revise the rent in compliance to the
variations in the property market.32
The review clause will act as a guideline to consider or disregard certain issues
and we can minimize the rent by finding evidence of the rental quotation in
similar rental areas to compare the commercial rate with other leasehold in the
Generally, upwards only rent review is applied in the open market revaluation
as this usually favors the landlord.34
However, we can suggest the remaining rent to be minimized by using the
upward/downwards rent review clause. As to the facts, there is no clause in the
lease agreement which agreed to the only application of an upward rent review.
Therefore, we may apply an upward/downwards rent review clause as the facts
shown that there is a surplus of rental office in the City of London for a
short period after UK’s withdrawal which brought about a 5% reduction to the
average rental payment for lease more than 20 years. As a result, the rent will
decrease for the period of time until the surplus issue is solved but will not
be lesser than the present ground rental value.
By virtue of that, the parties will need to think hypothetically on the
future rent since in reality we are unsure of when will the surplus of rental
office be solved for the rental value to increase.35
Hence, the hypothetical lease will lead us to presume a hypothetical leasing of
property occurring on the review date and the presence of a hypothetical
Plus, court practiced the presumption of reality where the parties are to
assume the property to be lease for a duration equivalent to the contractual period
starting on the related review date as Basingstoke and Deane37
which will be a hypothetical lease of 25 years.38
With reference to this, it is possible for a lower rent in the upcoming period.
Moreover, a rigid covenant ie. restricting only for office use will affect the
rent review and rental as this will be less tempting to the leasing of
properties and hence, a lesser rent to be imposed.39
Lastly, as to the facts, EMA wish to terminate the lease before the term
expired due to UK’s withdrawal. This is pertaining to the issue of ending the term
where tenancy was entered into a fixed period. In furtherance to that, the only
way to end the tenancy before the fixed term expired is when there is a break
clause that allow an advance notice to be given or by surrendering the tenancy
if landlord concurs.40
With this break clause, there is no responsibility for the tenant to pay any
rent after given of notice. However, if no notice is given, the tenant will
still be liable for the rent. Furthermore, a break clause can be incorporated with
respect to run in collaborative with the rent review clause whereby either the landlord
or tenant can terminate the lease if the rent is too high or lower than the
current market rent.41
The case of Esseltte AB v Pearl Assurance42
held that a valid notice subjected to s.25 LTA 1954 must be given if tenant
intends to quit from the tenancy whereby the tenancy will not determine unless it
is terminated in conformity to the stipulation as S.24 LTA 1954.43
According to the facts, the agreement clearly stated a notice should be
given on any one-fourth of the year to end the lease if UK withdraw from EU. If
EMA were to leave in the absence of a notice given, their tenancy does not cease
and will amount to abandonment whereby landlord will retake the ownership.44
Unquestionably, the facts merely stated that EMA surrendered the property and
clearly landlord does not agree on that. Moreover, there is no evidence that a given
of a termination notice to the landlord is mentioned in the facts. Hence, we
can advise EMA to forward a written form of notice to quit for the termination
of lease. With regards to that, once a notice is given, it will come into force
on the second quarter day in which EMA will not owed any liability and thus UK
don’t have to pay for the outstanding rent.
Table of Cases
Allied Dunbar Pension Services Ltd v Baker 2001 All ER (D) 46
Basingstoke and Deane Borough Council v Host Group Ltd 1988 1 WLR 348
Esseltte AB and British Sugar
PLC v Pearl Assurance PLC 1996 EWCA Civ 911
Gray v Owen 1910 1 KB 622
Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd. 1971 SCR
International Drilling Fluids
V Louisville Investments (Uxbridge) Ltd 1986 Ch 513
Norwich Union Life
Insurance Society v Shopmoor Ltd 1999 1 WLR 531
Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No.2)
1979 1 W.L.R. 1397
Reichman And Another V Beveridge 2006 Ewca Civ 1659
Street v Mountford 1985 2 WLR 877
Walls v Atcheson (1826) 11 Moore CP &
Exch Rep 379
Landlord and Tenant (Covenants) Act 1995, s.11(1)&(2)
Landlord and Tenant Act 1927, s.19(1)
Law Property Act 1925, s.52(1)
Land Registration Act 2002, s.4
Landlord And Tenant Act 1954 s.24 & s.25
Corinne Tuplin, ‘Consent to Underletting How Much Should
‘Yes’ Cost?’ (18 January 2013)
Harpun C, Bridge S, and Dixon M, Megarry
& Wade: The Law of Real Property (8th edn, Sweet & Maxwell
Pawlowski M, Leasing Commercial Premises (Estates
Pinsent Masons, ‘What room for tactics now?’ 2005 PLJ 7
QC Male J and Jefferies T, Rent Review (RICS
Business Services Limited 2005)
Rodell A, Commercial property (Guildford: College
of Law 2012)
A, Commercial property (Guildford: University of Law 2016)
Smith, Roger J, Property Law (6th edn, Pearson
Education Limited 2009)
1 Street v Mountford 1985 2 WLR 877.
2 Law Property Act 1925, s.52(1).
3 Anne Rodell, Commercial
property (Guildford: College of Law 2012)
4 ibid 201.
5 Roger J. Smith, Property Law (6th edn, Pearson Education Limited
6 Mark Pawlowski, Leasing Commercial Premises (Estates
Gazette 2004) 45.
8 Old Grovebury Manor Farm Ltd v W
Seymour Plant Sales & Hire Ltd (No.2) 1979 1 W.L.R. 1397.
9 Landlord and Tenant (Covenants) Act 1995,
10 Smith (n 5) 420.
11 ibid 421.
12 Rodell (n 3) 202.
13 Smith (n 5) 422.
14 Landlord and Tenant Act 1927, s.19(1).
15 Pawlowski (n 6) 45,46.
16 ibid 46.
17 International Drilling Fluids V Louisville Investments (Uxbridge) Ltd 1986 Ch 513.
18 Norwich Union Life Insurance Society v Shopmoor Ltd
1999 1 WLR 531.
19 Rodell (n 3) 209.
20 Corinne Tuplin, ‘Consent to Underletting How Much Should
‘Yes’ Cost?’ (18 January 2013)
21 Anne Rodell, Commercial
property (Guildford: University of Law 2016)
22 Allied Dunbar
Pension Services Ltd v Baker 2001 All ER (D) 46.
23 Rodell (n 21) 293.
24 Reichman And
Another V Beveridge 2006 Ewca Civ 1659.
25 Smith (n 5) 385.
Properties Ltd. v. Kelly, Douglas and Co. Ltd. 1971 SCR 562.
28 Walls v Atcheson (1826) 11 Moore CP & Exch Rep 379.
29 Smith (n 5) 385.
30 Gray v Owen 1910 1
31 Charles Harpun, Stuart
Bridge, and Martin Dixon, Megarry & Wade: The Law of
Real Property (8th edn, Sweet & Maxwell 2012) 855.
32 Rodell (n 3) 178.
35 ibid 180.
37 Basingstoke and
Deane Borough Council v
Host Group Ltd 1988 1 WLR 348.
38 John Male QC and Thomas Jefferies, Rent Review (RICS
Business Services Limited 2005) 10,11.
39 ibid 214.
40 ibid 266.
41 Pawlowski (n 6) 106.
42 Esseltte AB and British Sugar PLC v Pearl Assurance PLC 1996 EWCA Civ 911
43 Pinsent Masons, ‘What room for tactics now?’ 2005 PLJ
44 Pawlowski (n 6) 104.