Landlords' remedies have been restricted by Covid measures, but whilst ruling out forfeiture, CRAR and insolvency measures, this has not prevented debt proceedings for unpaid rent. Two judgements handed down in the last week have seen the High Court come down hard on tenants attemting to "eat and run". The first, Commerz Real Invesmtmentgesellschaft mbh v TFS Stores Limited came out of a rent claim at the Westfield Shopping Centre against the entity trading as The Fragrance Shop. The landlord sought summary judgement on its claim, with the tenant raising three grounds of defence, all of which failed, namely:
- The claim was issued prematurely and was contrary to the Covid Commercial Landlord & Tenant Code of Practice
The judge gave this short shrift. "It is clear from the first paragraph of the Code that it does not affect the legal relationship between landlord and tenant" and "The Code is not a charter for tenants declining to pay any rent". The judge also found that the evidence, if anything, showed that it had been the tenant that had failed to engage with the landlord.
- The landlord was trying to exploit a 'loophole' in the restrictions on the recovery of rent put in place by the government and the intention of those measures
Again, the judge was not persuaded. It was clear that the landlord was restricted from taking certain actions to recover rent but nothing prevented it bringing a claim for rent and seeking judgment on that claim.
- The landlord was in breach of its obligation to insure which ought to have included insuring against loss of rent due to forced closures in these circumstances.
The judge found there was no obligation in the lease for the landlord to insure against notifiable diseases and/or government direction and that, even if there was, this would not assist as the lease did not require the landlord to insure against loss to the tenant's business. It was not relevant that the tenant was required to contribute to the landlord's insurance. Such losses were for the tenant to insure.
There was also consideration of the rent cesser provisions but the judge found there were no grounds to imply a term to extend these. There was a keep open clause in the lease which applied unless the tenant was prevented from doing so by an Insured Risk. The rent cesser provisions applied where there was physical damage to the premises and did not cover the situation where the premises were forced to close due to a legal requirement. The judge considered it would be difficult to draft any such term with precision, in any event it would contradict the terms of the lease and, fatally, such a term is not so obvious it did not need to be said (the relevant test for a term to be implied). "The lease apportions risk between the parties… and no further" the judge concluded.
On 22 April 2021, a further judgment followed from the High Court in Bank of New York Mellon (International) Ltd and another v Cine-UK Ltd and others. The circumstances were, again, familiar: a number of tenants had been unable to trade to varying degrees during periods of Government imposed lockdown related to the Covid-19 pandemic and arrears had accrued from March 2020. The landlords had pursued the arrears through the Court and subsequently made applications for summary judgment on their claims. In response, the tenants raised various grounds of defence, including:
- The landlords should have been negotiating with the tenants pursuant to the Code of Practice rather than pursuing litigation. The judge disagreed, and commented that the Code sits outside of the litigation process. As he put it: "I… do not see that the existence of a voluntary Code encouraging negotiation should in any way obstruct a claimant who contents that they have a clear case seeking summary judgement and, assuming that such a clear case is made out, from obtaining it at this point".
- The landlords had the benefit of pandemic insurance which covered loss of rent, with the effect that the tenants should not have to pay their rent.
- The rent cesser clauses should be construed to apply in these circumstances, interpreting "damage and destruction" to include inability to trade, or alternatively, terms to the same effect should be implied.
- There was a "temporary frustration" over the periods of lockdown and enforced closures of the premises, resulting in rent not being payable for such periods. The judge noted that "temporary frustration" is not a legal concept and he did not regard there as being any real prospect of it being shown that any of the leases had been fully frustrated.
All of these arguments failed, with the Court deciding that the tenants had failed to show any real prospects of success in defending the claims brought against them and there was no other compelling reason for there to be a trial.
