I was talking to a friend who described to me a fascinating exchange he had had with a foreign client. Below is a hypothectical (but based on real events) transcript of an exchange between a UK real estate lawyer and a South East Asian investor client looking at buying some pretty expensive real estate in London.
Client: I need to understand the risks associated with tenants exiting the property?
Lawyer: The lease is for a 20 year term and there are more than 17 years left to run so the issue does not really apply to this property.
Client: I know the term has more than 17 years left but what if the tenant leaves early?
Lawyer: If Leman taught us anything it is that no tenant is too big to fail but this tenant has a triple-A rating so it is very unlikely that it will fail in the short term. The assignment provisions ensure that any new tenant would need to be at least A-rated.
Client: But what if the Tenant just walks away?
Lawyer: There are no break options in the lease so he cannot.
Client: But what if he just does?
Lawyer: It is a major listed plc, it would be easy to pursue it for the rent and liabilities. It is very unlikely as there would be reputational damage to the tenant as well.
Client: But what if he just tore up the lease?
Lawyer: The tenant does not have any right to tear up the lease.
Client: Yes he does, he has a right to walk away whenever he wants.
Lawyer: There is no right in English law to walk away from a lease.
Client: There is in South East Asian law.
Lawyer: Okay, now I understand your concern. You do not need to worry. As this property is in England and there is no right under English law for a tenant to just walk away this is not a risk for you.
Client: But in S.E.A. there is; how do we deal with this risk
Lawyer: I'll get back to you.
Any suggestions for the poor lawyer how he should get his S.E.A. client comfortable that English law is relevant and that the risk he perceives to exist does not actually exist?
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