Iconic club faces uncertain future as it loses battle over redevelopment clause

The Ministry of Sound (MoS) began its life in 1991 in a disused bus garage in South London. It was the first club dedicated to house music and the first to build a room that revolutionised world class sound quality. Today MoS is a global dance music powerhouse.

However, a recent County Court decision could see MoS ousted from its home of over three decades.

Background

MoS occupies the premises under a lease which expired on 29 September 2024. During the negotiations for a renewal lease, the landlord insisted on incorporating a new redevelopment clause which would allow the landlord to break the lease on a rolling basis.

This was vigorously opposed by MoS on the grounds that a such a break clause would harm MoS’s commercial interests, discourage potential investment and damage its goodwill. The matter therefore appeared before the County Court.

The decision

The Court determined that the following factors needed to be considered:

1. The landlord must prove that there is a real possibility that the premises will be required for reconstruction during the term of the new tenancy, which is an objective test.

2. If a real possibility is proved, the Court will conduct a balancing exercise in respect of the competing interests of the parties. The Court called this the ‘principle evaluation’.

3. If there is no evident, countervailing major factor, the Court will try and balance the interests of the parties by making the break clause as fair as possible. The Court called this the ‘content evaluation’.

4. It is important not to adopt a too rigid approach as the factors engaged in the balancing exercises are likely to be relevant to both.

5. Each case is fact sensitive, and the weight given to a particular factor may be different in every case.

6. Neither the interests of the landlord nor the tenant “trump” the other.

7. The Court’s function is to strike as fair and reasonable a balance of competing interests as the circumstances allow.

On the facts before the Court, the Court was satisfied that there was a real possibility that the premises would be required for reconstruction during the term of the proposed new tenancy.

The Court also accepted that MoS would face challenges should such a clause be included in the lease, however the Court’s view was that the redevelopment break clause would not render MOS’s business untenable. The court placed particular emphasis on the fact that it considered MoS to be a market leader with enormous leverage and ‘the ‘buyer’ in a buyer’s market. The Court therefore exercised its discretion in favour of the landlord and determined that the new lease should indeed include a redevelopment break clause.

The Birketts view

When seeking to introduce a break clause on a lease renewal the landlord should be armed with cogent evidence that can persuade the court that there is a real possibility of a development being carried out during the term. This means showing both a genuine intention to carry out the development and the ability to do so.

Tenants opposing such a break clause should collate evidence that shows the court how such a break clause would adversely affect its business operations, finances and goodwill.

The 1954 Act was designed to safeguard tenants’ interests, not to hinder development. In the circumstances, the court will consider all relevant facts and try to balance the commercial interests of both parties.