English County Court grants landlord redevelopment break in nightclub lease renewal

In Ministry of Sound Ltd v The British and Foreign Wharf Company Ltd, the Central London County Court held that landlords can secure a rolling redevelopment break clause in a renewal of a lease under the Landlord and Tenant Act (LTA) 1954 where there is a genuine prospect of redevelopment commencing during the term of the new tenancy. 

Neither the venue’s profile nor night‑time economy policies precluded the inclusion of a break option in circumstances where the planning context and delivery trajectory for redevelopment were credible. 

Applying the O’May principles, most tenant‑proposed departures from the existing lease were refused, save for targeted modernisation of a rent review assumption. When determining the rent payable under the new tenancy, the court applied a 26% discount to reflect the uncertainty caused by the inclusion of the landlord's break, alongside adjustments for realistic operational constraints.

Ministry of Sound

The premises are the iconic nightclub at Gaunt Street, London, occupied under a 2011 lease continuing by virtue of the LTA. The landlord is freeholder of the rear and long leaseholder of the front, necessitating a reversionary lease mechanism to bridge beyond the front headlease expiry. Renewal was not opposed.

The disputes concerned whether a landlord redevelopment break should be included, whether tenant‑proposed changes should be incorporated under O’May, and the appropriate section 34 rent. The site sits within the Elephant and Castle regeneration area. On extensive planning evidence, the court preferred the landlord’s expert and found redevelopment “possible” and policy‑consistent.

Redevelopment break

As to the break, the judge was satisfied there was a real possibility that the premises would be required for reconstruction during the new term. Generalised assertions that a break would destabilise operations or deter investment were found to be overstated and insufficiently evidenced. In particular, the tenant's expert was found not to have acted with sufficient independence – an issue that crops up repeatedly in cases that fall to be determined under the LTA.

The court ordered a rolling landlord redevelopment break on not less than nine months’ written notice, exercisable to expire no earlier than 30 June 2028, describing that formulation as balanced and proportionate.

Other terms of the lease

The court reiterated that the existing lease remains the starting point. Most tenant requests were characterised as re‑trading rather than addressing obsolescence or deficiency and were refused. The court did, however, modernise the rent review assumptions by deleting an outdated “comparable offices” definition and confirmed upwards‑only reviews. 

The tenant also obtained reinstatement relief so that alterations need not be reinstated if the lease ends via the redevelopment break or following later opposition under section 30(1)(f) of the LTA.

Osborne Clarke comment

The judgment underlines that landlords can obtain redevelopment flexibility on renewal where they can evidence a real possibility of redevelopment within the term. Venue prominence and policy protection will not, without more, defeat the inclusion of a landlord's break where the delivery case is credible. The O’May principles allow for focused modernisation (such as removing obsolete rent-review assumptions) but the court will resist wholesale alterations to, or a renegotiation of, the original terms. It is also clear that a redevelopment break can have a material, quantifiable impact on section 34 rent.

For landlords, the practical emphasis is on building a coherent evidence base for the “real possibility” test. They should align planning policy support with tangible steps on site control and scheme progression, show active market and developer engagement, and table indicative schemes. They should also propose balanced mechanics with a realistic earliest exercise date and sensible notice period, and align drafting with the delivery plan, including reinstatement carve‑outs and updated rent review assumptions.

For tenants, the focus should be on specific, well‑evidenced prejudice – demonstrating how a break would affect operations, financing, licensing and contractual commitments. Tenants should also concentrate on securing pragmatic protections for licensing continuity, reinstatement relief where redevelopment terminates the lease, and targeting O’May changes at genuinely obsolete or deficient provisions with clear justification.

In either case, a judge will take a dim view of either party's expert if they seek to act as an advocate rather than complying with their duty to the court.