Ministry of Sound ruling: Landlord’s redevelopment break clause permitted by the court

Last month, the Central London County Court ruled in the case of Ministry of Sound v The British and Foreign Wharf Company Ltd [2025] that the new lease should contain a landlord’s development break clause even when the existing lease of the premises does not contain such a provision.

In this case, the tenant, Ministry of Sound applied for a new tenancy of its premises at Gaunt Street under the provisions of the Landlord and Tenant Act 1954 and one of the main issues before the County Court was whether the new lease should include a landlord’s rolling redevelopment break option.

The tenant had argued such a break right would cause uncertainty resulting in serious financial, reputational and potentially legal consequences to its business. The Court however reiterated the principles of the 1954 Act, which were never intended to hinder a landlord’s plans to develop its property especially where there was a real possibility of redevelopment during the term of the new tenancy.

This judgment has significant implications for retailers when facing lease renewals, particularly in relation to prime locations and landlords wanting to re-develop. Below are the key considerations and protective measures retailers should adopt following this ruling.

Key considerations following the judgment

Landlords securing redevelopment break clauses on renewal

The judgment confirms that courts are likely to grant landlord redevelopment break clauses in renewal leases under the Landlord and Tenant Act 1954, even where tenants strongly oppose them. This is particularly concerning for retailers in prominent locations where:

• the site has significant redevelopment potential;
• property values may justify comprehensive redevelopment; and
• the landlord can demonstrate credible redevelopment intentions.

Rolling break options present uncertainty

In this case, the court granted a 'rolling break option' exercisable by the landlord from June 2028 on nine months' notice. This creates ongoing uncertainty for retailers because:

• the tenant cannot plan beyond the initial break date with any certainty;
• the nine-month notice period is relatively short for relocating a retail operation; and
• investment decisions such as refurbishment of the premises become difficult to justify.

Interestingly, the judge formed the view that any tenant would inevitably face difficult commercial and operational decisions as a lease nears the end of its term and these risks would no doubt have to be accounted for when entering into contracts as part of its daily operations. 

Prominent locations carry higher risk

Retailers in high-profile locations face particular vulnerability because:

• prime sites attract greater redevelopment interest;
• mixed-use or residential redevelopment may offer landlords higher returns than single retail use; and
• planning policies may favour residential or mixed-use schemes in urban centres.

What to do to protect against landlord’s development right being awarded by a court

During lease renewal negotiations

In the first instance, resist any break right entirely. Retailers should argue strongly against any redevelopment break clause forming part of the new lease terms and should challenge the landlord's redevelopment intentions. Where there is a genuine intention to redevelop, you should request to see evidence of at least the existence of credible redevelopment plans. Planning permission for the proposed redevelopment is not always likely to be in place but evidence of any communications with the local planning authorities would support an intention to redevelop the site. 

Where a landlord is able to demonstrate a genuine intention to redevelop during the term of a new tenancy and a break right is inevitable, retailers should consider negotiating the following protective terms:

• push for the longest possible period before the break becomes exercisable (the Ministry of Sound case allowed exercise from 2028, approximately three years into the term).
• seek a 'one-time only' break right rather than ongoing rolling rights.
• negotiate for substantially longer notice periods (12-18 months rather than nine months as was awarded in the Ministry of Sound case). This provides more time to secure alternative premises and relocate operations and would be particularly important for retailers with complex fit-outs or specialist operations.
• require the landlord to obtain full planning permission before exercising the break and where relevant, require proof of vacant possession of other parts of the building.
• the landlord providing suitable alternative premises to the tenant.
• negotiate substantial break compensation beyond the statutory entitlements which could include:
  • costs of any recent refurbishment carried out;
  • loss of goodwill associated with the location;
  • relocation costs including a contribution to fit-out the alternative premises;
  • loss of profits during relocation; and
  • negotiate additional compensation in the event the break is exercised but the landlord does not carry out the proposed re-development.

Conclusion

Early engagement between landlords and tenants is crucial on lease renewals. Parties should begin renewal discussions well before the Section 25 notice or Section 26 request. Tenants should understand the landlord's intentions early and consider whether agreeing other terms (rent, repairs) might reduce pressure for break clauses. Retailers should also engage early with its property litigation solicitors and surveyors to obtain strategic and valuation advice as soon as it becomes aware of its landlord’s intentions to redevelop. 

The Ministry of Sound judgment demonstrates that courts are willing to grant landlord redevelopment breaks even where tenants operate high-profile businesses from prominent locations. Retailers must therefore:

1. Resist break clauses vigorously during negotiations.
2. If unavoidable, negotiate comprehensive protections around timing, notice, conditions, and compensation.
3. Structure investments within stores to reflect the security of tenure actually provided.
4. Maintain strategic flexibility through business continuity planning.
5. Engage expert advisors early in the renewal process.

The key is to recognise that prominent locations, whilst commercially valuable, now carry increased risk of landlord redevelopment breaks on renewal. Retailers must negotiate from a position of strength, with clear evidence and robust protective terms, to safeguard their commercial position.