A Global Perspective On Commercial Lease Covenants

The UK's real estate market attracts significant levels of investment from across the world, and many global corporate occupiers. It is not unusual for one or more of the landlord, tenant or guarantor in a commercial letting to be an entity based outside England and Wales. How easy is it for a UK party to enforce the lease covenants of an overseas counterparty? Are there any other points to note when entering into a lease with a foreign entity? Below are some broad principles to bear in mind when considering dealing with an overseas counterparty.

ENFORCING IN THE UK

There may be no need to take action outside the UK against a non-UK counterparty. Does it have a centre of business or any assets in England and Wales? Did it provide a rent deposit or a UK-based surety or did a UK company give an authorised guarantee agreement (AGA)? If so, enforcement of a judgment may be carried out in the UK and be no more difficult than claiming against a UK counterparty.

ENFORCING PRE-BREXIT

Although the exact procedural rules vary across the globe and sometimes even across districts within one nation, most jurisdictions would agree that because the property in question is located in England and Wales, the courts of England and Wales are the most appropriate forum to hear the substantive case. Most jurisdictions also recognise one or more of the international conventions or agreements regulating the enforcement of an English or Welsh court judgment overseas, including:

EU Regulation 1215/2012 (the Recast Regulation) which contains a system for the reciprocal enforcement of judgments between all the EU member states plus Denmark; the Lugano Convention, which is similar to the Recast Regulation and governs jurisdiction and enforcement of judgments between the EU member states plus Iceland, Norway and Switzerland; reciprocal arrangements for enforcement between the UK and various Commonwealth and other jurisdictions; the Code of Private International Law Applicable to Recognition of Foreign Judgments from Non-member States (PIL), which applies to non-EU member states. It is subordinate to any existing international rules, treaties or conventions. It applies when there is no other applicable enforcement regime; and the New York Convention, in respect of international arbitration. Under these regimes, rather than the merits of a claim being re-heard in an overseas court, a claimant against an overseas counterparty may be able to enforce immediately or may only...