The High Court has ruled, in the 2026 case of Intro Nominee One and Two Ltd v Study Group UK Limited, that fire safety and cladding defects did not frustrate a commercial lease, meaning the tenant remained liable for unpaid rent.
The claim concerned a lease of commercial premises in Brighton, newly built prior to lease commencement and used as a residential education centre.
The Claimant Landlord, Intro Nominee One Limited, made an application for summary judgment against the Defendant Tenant Study Group UK Limited (SGUK) and Daily Mail and General Trust plc (the Surety) for unpaid rent in the sum of around £9million plus interest.
SGUK sought to argue that cladding issues at the premises made it unsafe and unoccupiable for its purpose, giving rise to a defence of frustration and meaning liability for rent did not continue.
For a contract to be frustrated there must be a serious event which is both unexpected (such that force majeure provisions or other terms do not anticipate it) and beyond the control of the parties, rendering it impossible to fulfil the contract, or that transforms the subject matter of the contract into something radically different. The effect of frustration is to end the contract and discharge the parties from further liability under it.
The lease commenced in 2007 and had a term of 25 years so expiring in 2032. When constructed and let, neither the Landlord nor SGUK has any reason to suppose there were serious fire-safety defects.
In 2022 investigations were carried out and the subsequent reports confirmed significant defects rendering the buildings unsafe to occupy for educational purposes. The premises would probably not be useable for academic purposes again before lease expiry.
As explained by the High Court "…the central issue is whether the lease by the Landlord to SGUK has been frustrated by reason of the cladding defects in the buildings (and/or by legislation passed following the Grenfell Tower disaster)".
The following lease terms were relevant:
- There was a defect liability period after which the Landlord would be excused from further liability. Thus there was no joint expectation that the premises once let would be defect-free.
- The repairing covenant required SGUK "whenever necessary to rebuild reconstruct renew or replace the whole of the Demised Premises"; an unlimited obligation except for an exception in respect of damage by Insured Risks (and suspension of rent in those circumstances alone).
- Clause 6.5 made it clear that the Landlord gave no warranty that the Premises were suitable for the purposes of the Tenant or any purpose.
Considering the above, the court held that "the Parties have allocated the relevant risk and either took into account or should have taken into account that there could be fire safety defects in the Premises of sufficient seriousness that the Premises might need to be rebuilt or remedied so as to prevent their use for SGUK's educational purposes".
The High Court accordingly held that the lease was not discharged on the basis of frustration of the parties' common purpose.
In the alternative to that primary case, SGUK sought to rely on changes of legislation requiring remediation of dangerous buildings following the Grenfell Tower fire as giving rise to frustration. The court rejected this argument on the basis that remedial works were required in advance of that subsequent legislation, and so this did not change the fundamental point.
While the court did not rule out the possibility of the doctrine of frustration applying to serious defects in a commercial lease, it depends on the circumstances and where there is foreseeability of the event arising – as in this case where responsibility for relevant risks was apportioned in the lease contract (albeit the specific risk was not identified) – there can be no frustration. The courts apply the doctrine of frustration narrowly and this case is no exception.
