COVID no defence to non-payment of commercial rent arrears

The decisions in two cases recently heard by the High Court will be welcomed by landlords of commercial premises.  The cases of Commerz Real Investmentgesellschaft mbH v TFS Stores Limited and Bank of New York Mellon (International) Ltd and v Cine-UK Ltd and others were disputes over non-payment of rent during the COVID-19 pandemic and in both the Court decided that the rent arrears were payable despite the impact of closure and restrictions on the businesses.

The facts in both cases were similar. In the first case the tenant TFS Stores Limited operates as ‘The Fragrance Shop’ and its landlord claimed £166,884.82. In the second case there were in fact separate claims heard together against Cine-UK Limited, operating a cinema complex, Mecca Bingo Limited and SportsDirect.com Retail Limited.

In the TFS case the tenant put forward a number of arguments including that the claim was issued prematurely contrary to the Code of Practice for Commercial Property Relationships during the COVID-19 pandemic.  It also claimed that the landlord should have insured against loss of rent due to forced closure under its insurance obligation in the lease. The Court disagreed with both these arguments and said that the Code did not alter a landlord’s ability to bring a claim for rent and service charge arrears.

In the Cine-UK and other cases, the tenants raised a number of arguments relating to the Code, construction of the Lease, insurance and saying that COVID was an event which temporarily frustrated the Leases. The Court rejected all arguments.

Both cases were decided by way of summary judgment. Summary judgment can be given in circumstances where the defendant has no prospects of successfully defending a claim and so there is no reason why the case should proceed all the way to a full trial.

The judgments will no doubt provide comfort to landlords of commercial premises who have experienced difficulties in collecting rent over the course of the last year. Commercial tenants may read the judgments with dismay as they sound the death knell for any future tenant defences based upon non-payment of rents resulting from the pandemic.

For further information and advice please contact Johanne Spittle on York 01904 71000, Wetherby 01937 593210, or Malton 01653 692247.