In times of upheaval, commercial tenants have turned to the doctrine of frustration in search of a way out of their leases – this includes during the Covid-19 pandemic, and now in the context of building safety. The courts have consistently refused to oblige, and the recent decision in Into Nominee One Ltd v Study Group UK Ltd [2026] EWHC 1201 (TCC) is no different.
In this case, the High Court considered whether a lease was “frustrated” by reason of serious cladding defects in buildings, which rendered the premises unsafe to occupy, and/or by legislation passed following the Grenfell Tower disaster. The Court found the lease was not frustrated and reaffirms that frustration will rarely provide a viable exit route from commercial leases.
Background
The dispute concerned Voyager House, a purpose-built education facility in Brighton. It consisted of two separate blocks joined via a glass corridor, one block was used for academic teaching and the other was a residential accommodation block.
The premises were let in 2007 under a 25-year lease to Study Group UK Ltd (SGUK).
After 14 years use of the facility by the tenant, investigations in 2022 revealed significant fire safety and cladding defects. Expert evidence confirmed that the buildings were unsafe to occupy and would require extensive remediation works, likely taking two and a half years or possibly more to remedy.
As a result of these issues, the tenant argued that the lease had been frustrated and its obligations under the lease had been discharged.
“Frustration” is a legal doctrine where a contract comes to an end through something unexpected happening after the contract was made, which makes it either impossible to perform, or so radically different from what the parties originally agreed that it would be unfair to hold either of them to it. This must be outside the control of both parties.
The landlord sought summary judgment for approximately £9 million plus interest for unpaid rent.
The tenant’s arguments
SGUK advanced two arguments:
1. Common purpose
The tenant argued that previously unknown inherent defects rendered the premises unsafe and unusable for their intended purpose, as a residential school or college, which fundamentally undermined the basis of the lease.
2. Legislative change
It was also argued that the Fire Safety Act 2021 and Building Safety Act 2022 imposed new obligations which made the building non-compliant and unusable without extensive works.
The court’s decision
The court granted summary judgment for the landlord and held that the lease had not been frustrated. Accordingly, the tenant remained bound by the terms of the lease.
Key reasoning
The court reaffirmed that frustration only applies where performance becomes “radically different” from what was originally agreed, and that mere inconvenience, delay or expense is not sufficient. Even significant remedial works and periods of non-occupation did not meet this threshold.
A central feature of the case was the allocation of risk. The contractual documents made clear how responsibility for defects was to be dealt with. The agreement for lease included a defects liability period, after which the tenant was expected to rely on warranties rather than the landlord. This structure demonstrated responsibility for defects was deliberately allocated between the parties, leaving no room for frustration to reallocate the risk.
The lease was a full repairing and insuring lease requiring the tenant to “whenever necessary to rebuild reconstruct renew or replace the whole of the Demised Premises”. It also made clear that the landlord gave no warranty as to the suitability of the premises for the tenant’s use.
Taken together this wording was deemed clear and that the tenant accepted that the premises might not be suitable or usable when taking on the lease.
The court rejected the tenant’s argument that changes in legislation frustrated the lease, on the basis the new legislation did not fundamentally alter the parties’ obligations. Buildings were always required to be safe and remediation works would have been necessary in any event if the premises was to be used for educational purposes.
Practical takeaways
- It was for a long time thought that the doctrine of frustration could not apply to leases. It is now clear that the doctrine does apply to leases, but this case reaffirms that frustration will rarely provide a viable exit route from commercial leases, even where premises are unsafe, not occupiable and unusable for extended periods of time.
- Lease terms will usually prevail. The courts are likely to analyse the lease, agreement for the lease, and warranty structure when considering where responsibility lies.
- Full repairing and insuring leases carry substantial risk for tenants, including obligations which may extend to substantial rebuilding.
- A clause that says the landlord gives no warranty that premises may be fit for purpose helps to shift the risk to the tenant. This highlights that strong drafting can defeat a frustration argument.
- Weak frustration arguments can be struck out early, in this case the court granted a summary judgment, and no full trial was needed.
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