Friday, 23 April 2021

COVID-19: High Court Gives Summary Judgement on Rent Arrears

 In the first reported decision* on Covid-related rent arrears, the High Court has given summary judgement to a landlord of commercial property in a debt action brought to recover the outstanding rents.

Commercial tenants currently have the benefit of the moratorium on forfeiture and restrictions on CRAR, which have been extended until 30 June 2021.

The moratorium doesn’t affect a landlord’s right to sue a tenant for rent arrears.

This case concerned a unit in Westfield, Shepherd’s Bush. The tenant had been obliged to close during the three lockdowns, but had opened between 15 June and 5 November, and between 2 and 19 December 2020. It had failed to pay rent since April 2020, so the landlord issued a claim for the outstanding rent, including interest.

The tenant tried three somewhat creative defences to the debt action, which were all struck down.

1. That the claim was premature in view of the recommendations in the Code of Practice for Commercial Property Relationships During the Covid-19 Pandemic – the court said the Code did not alter the legal landlord and tenant relationship and it was not a charter for tenants to refuse to pay rent.

2. That in pursuing a debt claim the landlord was exploiting a loophole left in the government’s Covid-related restrictions – the court said there was no loophole and that the government’s restrictions did not preclude a debt action and there was no basis for concluding differently.

3. That it should have been covered by the loss of rent insurance the landlord was obliged to have in place – the court said rent cesser did not apply as there was no physical damage to the property and the clause could not be construed more widely.

Debt actions are currently the only realistic option for most landlords in seeking to recover rent from tenants who they suspect can pay but who might be seeking to exploit the protections put in place.

The court’s verdict is not that surprising, but it will come as a relief to landlords. Nevertheless, parties should seek to engage constructively with one another in accordance with the spirit advocated in the Code.

It is likely that following the High Court’s judgement, similar claims from now on will be handled in the lower courts.

*Commerz Realinvestmentgesellschaft mbh v TFS Stores Limited [2021] EWHC 863 (Ch)


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