The High Court in England recently gave summary judgement to the landlord in Commerz Real Investmentgesellschaft mbh v TFS Stores Ltd, where the tenant attempted to defend debt claims brought by the landlord in respect of rents and service charges left unpaid during the COVID-19 lockdowns in the UK.
The tenant had a five-year lease of a unit in the Westfield Shopping Centre London which closed, like many other businesses, due to the COVID-19 lockdown in March 2020 and then during the subsequent lockdowns.
The landlord successfully brought a claim for unpaid rent and service charge in the sum of £166,884.82 plus interest. The tenant tried to defend on numerous grounds, all of which failed, some of which are as follows:
- The landlord acted prematurely and contrary to the "Code of Practice for commercial property relationships during the COVID-19 pandemic" published by the Ministry of Housing, Communities & Local Government. It was found that in fact there was significant engagement from the landlord and in any event the "Code" was voluntary.
- The landlord took advantage of the "loophole" in the legislation suspending forfeiture for non-payment of rent as the said legislation did not prevent a claim for unpaid rent and service charge. The tenant thought this was grossly unfair.
- The tenant argued the landlord should have maintained insurance against loss of rent from a "notifiable disease". The lease was drafted in such a way that the landlord was to insure against loss of rent from an "Insured Risk" but the definition of the same did not include notifiable diseases. The rent abatement clause in the lease suspended rents where there was "damage" to property by an "Insured Risk". Therefore, rent continued to be payable unless there was physical damage to property by an Insured Risk.
The key point for landlords and tenants from this judgment, is that not paying rent during the COVID-19 lockdowns will not always be protected by the regulations published by the Government designed to help businesses during these extraordinary times. The judgment reinforces the importance of lease drafting and highlights how the need to monitor the impact legislation has on those who it is designed to protect.
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