Developer Malory Clifford and Network Rail are embroiled in a legal row with KPMG over a mysterious missing paragraph affecting the lease break at one of the accounting firm’s largest City buildings.
KPMG is arguing that it should be allowed to exercise a break on the 108,000 sq ft it occupies at 1 Puddle Dock, EC4.
If KPMG loses the case, the cost of its planned 500,000 sq ft relocation will greatly increase.
The firm has issued a claim asking for clarification of the meaning of its lease, which runs until 2029.
It argues that it is entitled to exercise a break so long as it gives notice to freeholder Network Rail between July 2007 and July 2008.
However, Network Rail and long leaseholder Malory Clifford’s Blackfriars Investments argue that, although the dispute is over a supposed “missing paragraph” in the lease, they believe KPMG cannot break the lease unless a rent review is exercised.
This is unlikely because the building is significantly overrented, at around £40 per sq ft, costing KPMG £4m pa.
A KPMG spokesman said: “We are seeking clarification to the interpretation of the lease on our property at Puddle Dock.
“This is part of a sensible strategy for an organisation with a number of properties. We first raised this issue 10 years ago, so these are ongoing discussions.”
Clifford said: “The paragraph was typed in the draft lease but not in the actual lease. KPMG is trying to suggest that there were discussions and negotiations that brought about the missing paragraph, but it has brought no evidence.”
KPMG appointed Jones Lang LaSalle a year ago to seek a 500,000 sq ft HQ, as part of a strategic review to consolidate its City offices.
The firm is based in five main buildings in the Blackfriars area including its head office in Salisbury Square, EC4; 235 Blackfriars Road, SE1; 20 Farringdon Street, EC4; and 1-2 Dorset Rise, EC4; as well as having over 100,000 sq ft in Canary Wharf, Docklands.
KPMG is due to face Network Rail in court later this month or in early December.
References: EGi News 21/11/05
