In the first bulletin following our summer break, we consider the Court of Appeal's decision on the recoverability of pandemic rent arrears under a commercial lease and the Upper Tribunal's decision on how to secure a new telecoms Code agreement where there is an intermediate lease. All this together with insights from our colleagues around the firm, positive news and the usual quiz.
Court of Appeal unanimously confirms that commercial rent accrued during the pandemic remains payable
In a decision which affirms longstanding principles, the Court of Appeal has unanimously found in the favour of commercial landlords following linked appeals in these cases:
- Bank of New York Mellon (International) Ltd v Cine-UK Ltd [2022] EWCA Civ 1021; and
- London Trocadero (2015) LLP v. Picturehouse Cinemas Limited & ors
The common issue in dispute in both cases was whether the commercial tenants were required to pay rent to their landlords during periods of the pandemic when they were unable to open or run a business due to the lockdown restrictions. The tenants argued that as they were unable to open, under various provisions under their leases, they were not required to pay rent. At the High Court last year, in both cases the Court found against the tenants and held that the rent accrued during periods of lockdown remained payable.
The tenants obtained permission to appeal the first instance decisions to the Court of Appeal. One of the main arguments raised by the tenants was that during the lockdowns, as it was unlawful to open their businesses, there was an implied term in their leases that their obligation to pay rent ought to be waived during the period opening was restricted. The Court of Appeal handed down their decision over the summer, and they rejected the arguments raised by the tenants and upheld the decisions of the High Court.
The Court of Appeal's position was that the tenants' arguments did not reflect what was agreed between the parties at the time of entering into their respective leases. This reinforces commercial landlords' right to recover arrears which have accrued since the pandemic, which will be subject to the arbitration scheme under the Commercial Rent (Coronavirus) Act 2022.
If you are interested to read more, have a look at our longer article discussing the cases.
The first decisions under the coronavirus rent arbitration scheme are discussed here.
Tribunal rules on how to secure a new Code agreement where there is an intermediate lease
In Vodafone Limited V Gencomp (No.7) Limited (1) A P Wireless II (UK) Limited (2) [2022] UKUT 223 (LC), Vodafone had been granted a lease in 2003 by the freeholder at the time, Publico, to use the tower of the Old Fire Station in Bingley for its electronic telecommunications equipment (the Original Agreement). Before the Original Agreement expired in 2018, the freehold changed hands more than once and along the way, a freeholder granted an intermediate lease to the second defendant, APW, to expire in 2058 that was subject to and had the benefit of the Original Agreement.
Vodafone sought to renew the Original Agreement under the Code and although neither Gencomp (the current freeholder) nor APW objected to this, the Tribunal was asked to determine the process by which this should be achieved.
Vodafone's position was that as Gencomp was successor in title to Publico, the grantor under the Original Agreement, then on a strict interpretation of the Code Gencomp was the correct party to confer Code renewal rights on Vodafone
APW, on the other hand, argued that it was entitled to be treated either as a party to the Original Agreement or as a successor to the reversion of the Original Agreement and could therefore give and receive notices pursuant to the Code and enter into a renewal agreement with Vodafone.
The judge pointed out that the Code does not deal with situations where the immediate landlord is not the freeholder, that "it may be that the problems to which this not uncommon form of property arrangement gives rise were simply not considered by the drafters of the Code" and that "it is therefore necessary that the Code be interpreted in such a way as to provide a procedural route to enable an effective …agreement to be obtained through the Tribunal if necessary".
The Tribunal held that the basic principle in the Code is that only occupiers of land (discounting the occupation of an operator already in occupation) can confer Code rights while others with an interest in land or rights over it may only be bound by Code rights.
It concluded that Vodafone would have to rely on paragraph 20 of Part 4 to the Code to acquire new Code rights from APW as occupier and that the Tribunal could impose an agreement under that part (subject to the test in paragraph 21)
The procedure under paragraphs 33 and 34 in Part 5 of the Code to amend/renew or bring to an end an existing Code agreement was not available in these circumstances because the Code specifies that notices served, and agreements imposed under these sections must relate to the parties to the original agreement and their successors and APW was neither of these things.
The judge flagged that whilst the use of Part 4 was a solution in part to the circumstances of this case, it did not address the "gap in the legislation" which means that an intermediate lessee who wishes to redevelop a building over which Code rights have been granted by a superior landlord will find themselves in difficulty with no obvious means of bringing Code rights to an end. The judge's advice: "A person contemplating taking an [intermediate] lease with a view to redevelopment would… be well advised either to adopt a different structure or to ensure that any Code agreement which may interfere with their proposals has been terminated before they acquire their interest".
For telecoms advice contact partner Emma Barnfield.
Insights from around the firm
- Driving ESG in the construction industry – Partner David Cordery speaks to Tunde Agoro, Head of ESG at Hydrock about the state of play for ESG in the construction industry
- Legally brief: Formulating strategy for a winning case. Associate Olivia Jenkins speaks to Paul Darling QC and Ruth Keating of 39 Essex Chambers about the importance of being selective when identifying your team, opponent(s) and dispute resolution forums.
- Women and Equalities Committee calls for the menopause to be protected.
Positive news
- Singapore has pledged to decriminalise homosexuality. Prime minister Lee Hsien Loong said scrapping the law would bring legislation in line with social attitudes.
- The UK government announced that gardeners will no longer be able to buy peat from 2024. The move was welcomed by environmental groups as peat sequesters carbon and provides critical habitat for wildlife, but it is routinely dug up and sold as compost in UK garden centres. There is more work to be done, however, as the ban does not include the commercial use.
- Previously extinct in England, the large blue butterfly is now considered to be more abundant in south west England than anywhere else in the world.
