The latest in redevelopment breaks

There has been a flurry of recent case law on the circumstances in which the Court will order the inclusion of redevelopment break clause in lease renewals under the Landlord and Tenant Act 1954. These have a real impact on landlords who may wish to redevelop commercial properties in England and Wales.

Following from BMW v K Group Holdings (discussed here), the latest is the High Court decision in B&M Retail Ltd v HSBC Bank. Upholding the County Court decision, the judgement contains some helpful, commentary on the factors that the Courts will consider:

The Court has a wide discretion to order a break clause and will carry out a balancing exercise, weighing up the tenant's right to security of tenure with the landlord's right to redevelop. In general a landlord should not be prevented from pursuing a redevelopment plan but there may be circumstances where the court could conclude that it would be reasonable to delay the operation of a break clause.

A landlord with a well-developed development plan is much more likely to be awarded a break notice than one which is "little more than a gleam in the eye of the landlord" or where the break was sought purely to increase the value of the landlord's property. In HSBC's case, the landlord's plans were well developed, demonstrated by the fact that it had entered into an agreement for lease for development and had applied for planning permission.

The Court may well regard a delay to the landlord's plans as unreasonable if the consequence of the delay is that the redevelopment will be put at risk.

The Court will give weight to any hardship that would be suffered by the tenant as a result of a redevelopment break and it would be wrong to say that in every case, redevelopment "trumps" security of tenure.

If you are a commercial landlord or tenant dealing with 1954 Act lease renewals or terminations, or you require advice about redevelopment break provisions and how they may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies' contact.