Friday, 23 April 2021

COVID-19: Rent Arrears - High Court Strikes Again

 So, you wait ages for a case on Covid-related rent arrears, and along come two in as many weeks.

This time the High Court has summarily refused defences advanced by several tenants in claims brought by their landlords, Bank of New York Mellon (International) Limited and AEW UK REIT PLC.

The cases concerned non-payment of rent throughout the pandemic.

Here are the defences to non-payment made by the tenants and, simplified, the High Court’s responses in each case in italics:

1. The rent cesser clause applied to the pandemic, either expressly or impliedly. There could be no rent cesser as there was no physical damage to the property and once that position had been reached all other arguments failed.

2. The government’s guidance (the Code) required landlords and tenants to negotiate, and in the absence of such negotiation court proceedings couldn’t be brought. The government’s guidance is voluntary and is outside the litigation process, and had no relevance where, as in this case, the tenants were not asserting that they were unable to pay.

3. Frustration, suspensory frustration, supervening illegality or temporary failure of consideration. None of the lockdown measures has made it illegal to pay the rent and so the arguments as to frustration, suspensory frustration, supervening illegality or the temporary failure of consideration would not succeed.

Well done to the tenants for trying, although it’s not surprising these arguments have failed as they have been discussed many times in legal commentary over the last year.

At the end of his judgment Master Dagnell recognised that the pandemic and the ensuing Covid regulations have been unprecedented and that it is impossible not to feel sympathy for tenants who have been denied the ability to trade.

However, adopting wording from the judgment in TKC v Allianz (see previous post), concluded it was not for the courts to adapt principles of contractual interpretation and implication to unprecedented circumstances.

That was a matter for Parliament.

He concluded:

“In times of uncertainty the law must provide a solid practical and predictable foundation for the resolution of disputes and the confidence necessary for an eventual recovery … Contractual rights are to be evaluated by applying settled principles to the contract in question. Legal certainty remains paramount and gives the surest basis for resolution”.

When it comes to questions of forfeiture, CRAR and statutory demands, Parliament did intervene and temporarily changed the law, and extended those changes as the pandemic progressed.

However, as has been pointed out many times in legal commentary, and on this blog, rightly or wrongly Parliament chose not to suspend all rights of action for recovery of rent arrears by debt action.

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