ARTICLE
19 August 2021

Commerz Real Investmentgesellschaft MBH v TFS Stores Ltd [2021] EWHC 863 (Ch), 16 April 2021

GC
Gatehouse Chambers

Contributor

Gatehouse Chambers (formerly Hardwicke) is a leading commercial chambers which specialises in arbitration and all forms of ADR, commercial dispute resolution, construction, insolvency, restructuring and company, insurance, professional liability and property disputes. It also has niche specialisms in clinical negligence and personal injury as well as private client work.
Coronavirus – commercial lease – rent arrears – summary judgment – Code of Practice for commercial property relationships...
UK Real Estate and Construction
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Coronavirus - commercial lease - rent arrears - summary judgment – Code of Practice for commercial property relationships

The facts

The claimant landlord was the headlessor of the Westfield Shopping Centre (L). The defendant was the tenant of one of the units (T). As a result of the COVID-19 pandemic, T had been forced to close its shop between during the lock-downs. T had not paid any rent since April 2020, and substantial service charges were outstanding. L issued a debt claim and later a summary judgment application for the arrears, interest and costs.

T defended the application for summary judgment on four grounds, arguing that (1) the claim was issued prematurely contrary to the Government's guidance in the Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic ("the Code"); (2) the claim was a means of circumventing measures put in place to prevent forfeiture, winding up and recovery, and pursuing it was exploiting a "loophole" in the restrictions placed upon the recovery of rent put in place by the Government; (3) L was obliged to maintain insurance for loss of rent resulting from a notifiable disease and/or government action and had to claim under the loss of rent insurance policy before commencing proceedings to recover rent; (4) the rent cesser provisions in the lease, properly construed, applied to the COVID-19 pandemic which amounted to a suspending event for the purposes of the lease.

Judgment

Chief Master Marsh granted L's application for summary judgment.

The Master held that the Code did not affect the legal relationship between landlords and tenants. Although the Code encouraged landlords and tenants to take a balanced view, it was not a charter for tenants declining to pay any rent. Further, the Code was not a good reason why the claim should go to trial as L had engaged with the Code and any lack of engagement was on part of T.

The restrictions imposed by the Government did not extend to seeking a money judgment for unpaid rent. There was no basis to restrict L's right to access the court, or that the court's powers to summarily determine a claim under the CPR.

On the true construction of the lease, L was not obligated to ensure against L's business loss. Further, the rent cesser provisions only applied where there was physical damage to the premises. There was no basis for construing those provisions so that they applied in the event of the facility and/or the premises being closed due to a legal requirement. The obligation to keep open and to trade was suspended but that was a different matter.

Conclusion

The Master held that L had discharged the burden of establishing that the rents were due and that T had no real prospect of defending the claim. He made it clear that context in which the claim was made did not entitle T to contend that those principles were now part of an area of developing law. T was not able to point to any conduct on the part of L that might be regarded as oppressive or that the claim had been issued prematurely. In the circumstances L was entitled to judgment pursuant to CPR Part 24.

The judgment makes it clear that tenants who have not paid any rent and not engaged meaningfully will be given short shrift by the court. However, the Master's reasoning suggests that the court may take a different view had the tenant paid some rent and/or engaged more meaningfully with the landlord, so watch this space.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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