COVID-19: Landlord successfully sues Tenant for rent arrears built up during the pandemic

In Commerz Real Investmentgesellschaft MBH v TFS Stores Ltd [2021] EWHC 863 (Ch) (16 April 2021) the High Court has upheld a landlord's (L) application for judgment against the tenant (T) for non-payment of rent and service charges.

T had to close its shop at the Westfield Shopping Centre as a result of the various lockdowns. T had not paid any rent since April 2020 and the monthly service charge for April, May and June 2020 was also outstanding.  L therefore brought a simple court claim against T for the rent arrears.

T sought to defend L's claim on the grounds that:

  • It had been issued prematurely contrary to the Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic (Code) see our previous blog.
  • L was exploiting a "loophole" in the restrictions put in place by the government to prevent forfeiture, winding-up and use of commercial rent arrears recovery (CRAR).
  • There was an implied term that L would insure for, and claim on, insurance for loss of rent and service charges due to forced closures and/or denial of access due to notifiable disease or government action.

The court held that the Code did not vary or suspend the contractual terms of any commercial lease and that, although the government had restricted some remedies, there was no restriction on a landlord bringing a claim for rent arrears.

On the insurance point the court held that the obligation to pay rent was only suspended under the “rent cesser” clause where there was physical damage to the premises, which didn’t apply here. The court refused to imply terms which would have meant that any rent suspension provisions applied in the event of the premises being closed due to a legal requirement.

It goes without saying that the pandemic and resulting lockdowns have had an enormous impact on tenants, but also on landlords.  Whilst commercial tenants have been protected to a degree, for now, this case serves as timely reminder that landlords do retain other options.

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