Mayfair restaurant wins High Court lease extension battle

Mayfair restaurant Hush has won a High Court battle with its landlord over an option to extend its lease. The case centres on whether the option to extend the lease by five-and-a-half years can be reinstated by the court after it was terminated by the freeholder during the Covid-19 pandemic. Under the terms of the lease, the option can be forfeited in the event of non-payment. During the pandemic, the restaurant fell into rent arrears. The landlord forfeited the option but did not forfeit the lease. Instead, the landlord waived some of the rent and allowed it to be paid off in instalments. At a hearing last month, lawyers for Lancashire Court-based Hush asked High Court judge Jonathan Klein to reinstate the option, arguing that, like the lease, in this situation a court can grant ‘relief from forfeiture’. And in a ruling handed down today (1 December), the judge agreed. In his ruling, the judge found that the option “is capable of giving the option holder an interest in the land”, which both sides agreed was necessary for the claim to succeed. The judge said that his conclusion was “supported by the fact” that the option was noted against the freehold title in the Land Registry. Second, the judge said he was “satisfied” that the provision to terminate the option was intended to provide security in case of non-payment, and mirrored the forfeiture clause of the lease. “I have come to the conclusion that it would be unconscionable for the defendants to retain the benefit of their termination of the option and that I should exercise my discretion in the claimant’s favour,” he said. He said that, if the landlords had chosen to terminate the lease, not the option, due to rent arrears, Hush would have been granted relief from forfeiture because it paid the debt. “In this case, within a matter of weeks of service of the notice, the parties negotiated a settlement in relation to the rent arrears in issue, which is reflected in the Rent Concession Agreement, with which the claimant has fully complied, including by paying about £100,000 on the date the Rent Concession Agreement was concluded,” he said. “It would be particularly unfair in this case for the claimant not to be granted relief from forfeiture because, by not forfeiting the lease at the same time as they terminated the option, the defendants created a situation in which, whatever the outcome of a relief from forfeiture application, they still have a source of rent, and can expect to benefit from the claimant’s primary obligation to pay rent… for the remaining term of the lease,” he said. He added that Hush’s default “was not wilful”. It was caused by national lockdowns, and would not have occurred had there not been a pandemic. Jamie Barber, founder of Hush, said he was “delighted and overwhelmingly relieved” that Hush’s presence in Lancashire Court has been secured into the next decade and beyond: “Geoffrey Moore and I founded Hush 22 years ago, and we have been an exemplary tenant throughout that time, becoming an institution and creating an oasis in the middle of Mayfair.” He said it was “extremely disappointing” that the landlord “chose to take commercial advantage of Covid by terminating our option for a new lease because of a ‘late payment’ two years ago in the midst of lockdown, just days before a rent concession was documented. Thankfully, the court has found in our favour.” He added: “No one from Royal London [the landlord] has communicated with us at all about the case since Covid, and so this process has felt faceless and in some ways quite sinister. But for us, it is a big deal. This is a victory for all restaurant, bar and retail operators still recovering from Covid scars that have faced unconscionable practices by landlords.” Mark Reading, a partner at Mishcon de Reya which acted for Hush, said the ruling confirmed an important point. He said: “This important decision has confirmed that the court does have jurisdiction to consider whether relief from forfeiture should be granted in relation to an option to take a new lease. “The court agreed with the claimant that the option conferred proprietary rights and that these came into effect when the option was granted, rather than the commencement of the period when the option could be exercised. We (at Mishcon) are thrilled at the court’s decision, which will allow Hush to continue trading successfully from the premises into the next decade.” Hush Brasseries Limited v (1) RLUKREF NOMINEES (UK) ONE Limited (2) RLUKREF NOMINEES (UK) TWO Limited Business and Property Courts (HH Judge Klein) 1 December 2022 Mark Sefton KC (instructed by Mishcon de Reya LLP) for the claimant. Katharine Holland KC (instructed by DAC Beachcroft LLP) for the defendants.