(This story has been updated to include legal comment on the Crown's likely next steps.)
Social media giant Twitter is being sued by the Crown Estate, the King's property company, over alleged unpaid rent for its London headquarters.
The estate filed a claim against Twitter in the High Court in London last week, according to multiple news reports. CoStar News first reported on the potential dispute between the independent property company of the reigning British monarch and the world's second-richest man over unpaid office rent last year.
The social media giant is yet to respond to requests for comment. The Telegraph reports that the Crown has filed the claim against Twitter Inc and its UK subsidiary in the High Court.
A Crown Estate spokesman has said that court proceedings had been issued in the dispute over Twitter’s UK headquarters in the West End.
According to reports that first surfaced in the New York Times, in an effort to cut costs following Elon Musk’s $44 billion acquisition of Twitter, the social media company has stopped paying rent at its global offices and its San Francisco headquarters while Musk’s team tries to renegotiate the terms of its leases. The New York Times has reported that Twitter has received complaints from real estate firms like Shorenstein, which owns its San Francisco buildings.
Musk is taking increasingly severe measures to cut costs and make the social media platform more profitable, he says. He has laid off 50% of its more than 7,000-person workforce, pledging that fired US-based employees would get three months' pay, including 60 days of salaried pay, and one month of severance.
The move to restructure its leases follows a more general office scaleback by US tech giants, with Meta dropping plans for major offices in the US, Dublin and London.
CoStar News revealed in December 2020 that Twitter, the US social media group then most famed for its pithy update platform, had committed to its London headquarters by regearing its lease and increasing the space by around a third.
The news was a big lift for the London office occupancy market in the middle of the pandemic, particularly as Twitter had hit the headlines that May when chief executive Jack Dorsey had said its employees would be allowed to work from home “forever” in a widely reported company-wide email.
The US technology firm first agreed a deal at the tail end of 2013 to move to the Crown Estate and Norges’s Air W1. It paid £76.18 per square foot on a 10-year lease in transactions that saw it ultimately take 27,733 square feet on the first floor and 24,468 square feet on the sixth floor at the office development near Piccadilly Circus.
In December 2020 it agreed to regear the lease on this space and take 30,924 square feet on the third floor to take its occupancy to around 83,000 square feet.
The Air W1 development by the Crown with Stanhope comprises 180,000 square feet of offices just off Regent Street.
DeVono Cresa advised Twitter on that. The Crown was advised by CBRE.
The Crown looks after a 10 million-square-foot portfolio including some of London's most celebrated retail and leisure pitches on behalf of King Charles III.
According to both Forbes and Bloomberg, Elon Musk is no longer the world's richest man after a sharp drop in the value of his shares in electric car company Tesla last year.
He has been overtaken by Bernard Arnault, the chief executive of luxury goods group LVMH.
John Wallace, solicitor and MD at Ridgemont, explained that the Crown Estate would have issued a Part 7 claim in the High Court for the recovery of the rent arrears, plus interest and costs.
"Where there is no lessee right of set-off, deduction or counterclaim contained within the Lease, it may be possible for the Crown Estate to apply for summary judgment. This is a 'mini trial' where the Court considers if the Defendant, in this case Twitter, has any reasonable grounds for a Defence, and if not, grants judgment without the parties having to go through substantive proceedings. Such a hearing would take place in the next six months.
"Even if an application for summary judgment is refused, the Court may order that Twitter pays an amount into Court. The receding of the UK’s economy will inevitably lead to commercial landlords having to take action against non-paying tenants. I would expect to see a sharp rise in commercial rent arrears claims in Q2 and Q3 of 2023, given the Office for Budget Responsibility’s prediction that a recession will until at least autumn 2023.
"Commercial tenants need to be proactive in communicating with landlords, as landlords have several tools at their disposal to enforce payment of rent arrears, either by initiating proceedings or seizing goods."