Right to a Landlord Break?

In the case of BMW (UK) Ltd v K Group Holdings Ltd, the judge determined a lease renewal claim under the Landlord and Tenant Act 1954 (the Act). The claim related to four leases of four units of premises at 70 Park Lane all occupied by the tenant, BMW, and used as a car showroom.

The issues before the court were whether a landlord’s break clause, a request by the landlord for the central unit, could be included in the new lease and the amount of the renewal rent.

There was no disagreement on the valuation principles to be applied under the Act. However, the experts were miles apart on the rent figure. Further, the landlord’s expert deemed BMW a special purchaser who would pay a higher rent than anyone else for one of the units if it was vacant. The tenant’s expert did not agree. Neither did the judge. The judge said it was a question of a negotiation between a willing landlord and a willing tenant where the landlord wants the highest possible rent and the tenant wants the lowest possible rent. The judge looked at comparable rents and other relevant issues. The result was a rent of £1,411,956 per annum.

The landlord wanted a landlord’s break on the basis that it might want to run its own business from the central unit.

The judge considered the landlord’s intention and whether the evidence provided showed the landlord’s intention to run its own business from the premises was ‘a real possibility’.

He said “… it is a question of whether such an intention is more than just a mere thought which has not matured into a genuine and workable decision.”

On the evidence, the judge held that test was not satisfied and a landlord’s break clause would not be included in the lease renewal.

The decision highlights the need for a landlord to carefully evidence its intention when seeking a break right.

Posted on 10/05/2023 by Ortolan

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