WeWork - Case Update

WeWork has succeeded in its application to dismiss the first of two forfeiture claims brought by the landlord of its flagship UK location at Two Southbank Place in London.

WeWork took over the space — a serviced office building comprising 300,000 square feet over 17 floors — in January 2019. The lease is for a term of 20 years at a passing rent of just under £20 million per annum. The premises were fitted out by WeWork at a cost of over £50 million. The landlord, a Luxembourg company and a member of the Almacantar group, contributed over £36 million to the refit.

In late 2023, the landlord commenced forfeiture proceedings, arguing that the lease should be forfeit due to the US Chapter 11 bankruptcy of a guarantor under the lease. WeWork sought the summary dismissal or strike out of the second forfeiture claim, taking the position that the right of forfeiture had not arisen as a matter of the proper construction of the lease.

WeWork’s position relied on the fact that the original guarantor under the lease had undergone a restructuring in November 2023 pursuant to which it was divided into two companies — the Surviving Company and the Resulting Company. The Resulting Company is a limited liability company incorporated in consequence of the division. The Surviving Company is the company that filed for Chapter 11 protection. WeWork argued that the Resulting Company had become the guarantor under the lease as a result of the plan of division, and the Resulting Company’s inability to pay its debts on a cash-flow or balance sheet basis had never been determined by a court, as required under the lease.

While acknowledging that the question was a difficult one and that powerful arguments had been presented on both sides, the High Court ultimately agreed with WeWork that the right of forfeiture had not arisen under the terms of the lease, which required a prior judicial determination of the guarantor’s inability to pay. The Court found that the Resulting Company was the guarantor under the lease, and that company, in contrast to the Surviving Company, had not filed any Chapter 11 petition.

As a result, the High Court granted summary judgment dismissing the claim.

The decision can be accessed here.

Professionals involved:

• James Ballance and Andrew Myers, solicitor advocate, (instructed by Stephenson Harwood LLP) for 2 Southbank Tenant Limited (WeWork)

• Zia Bhaloo KC and Simon Johnson (instructed by Ashurst LLP) for SBP 2 S.À.R.L (the landlord)