On 16th April, a summary judgement was passed down in what is believed to be the first successful commercial rent claim decision which allows the landlord to take enforcement action against a commercial tenant for failing to pay rent under the terms of the lease due to the knock-on effects of COVID-19 lockdowns.
In Commerz Real Investmentgesellschaft mbh v TFS Stores Limited  EWHC 863 (Ch) Chief Master Marsh ruled in favour of the landlord who sued for non-payment of rent and service charge that accrued during the pandemic at their premises at the Westfield Shopping Centre in West London.
The judgement avoided the need for a full trial as it was ruled there was no real chance of success at trial. The ruling will dismay tenants as there will likely be a flood of commercial rent claims from landlords seeking to recover unpaid sums.
This was a case in which the claimant is the leaseholder of this premises in the shopping centre whilst the defendant is a retail chain known as The Fragrance Shop (TFS) who was the tenant of the claimant and was granted a 5 year lease beginning in 2019. As a result of the COVID-19 lockdown measures TFS was forced to close on three separate occasions and stopped paying rent and in April 2020 which the claimant claimed nearly £167,000 plus interest.
Three defence arguments were presented by the defendant:
- The claim is said to have been issued prematurely contrary to the Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic.
- The claim is said to be a means of circumventing measures put in place to prevent forfeiture, winding up and recovery using CRAR. Issuing and pursuing the claim is said to be the claimant exploiting a ‘loophole’ in the restrictions placed upon the recovery of rent put in place by the government.
- The defendant alleges that the claimant is in breach of its obligation under clause 5.2 of the lease under which it covenanted to observe and perform its obligations under schedule 3, which included an obligation to insure. The defendant points to that obligation and says it is reasonable to expect that the claimant would insure against loss of rent due to forced closures and/or denial of access due to notifiable diseases and/or government action.
However, these were dismissed by the Court which held that the Code of Practice encourages a balanced view and is “not a charter for tenants declining to pay any rent”. Also, it was ruled that there was no restriction on landlords bringing a commercial rent claim and seeking a judgement from the court. The exact steps that may be taken are restricted but the entitlement to bring the claim before the court remains unaffected. Finally, the rent cesser did not apply as there was no physical damage to the property as per the lease and “there is nothing in the lease that could ground the notion that the claimant is obliged to insure the defendant’s business against loss”.
Based on the above findings the landlord had satisfied the Court that rents were due and TFS had no real prospect of defending the commercial rent claim at trial. Summary judgement was granted for the amounts claimed.
Do you have a commercial rent claim or are required to defend one in light of the COVID-19 pandemic? If you have a case that you need help with, Alston Asquith has offices in London and Hertfordshire and can arrange a call to provide some initial advice on the steps to take.
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