Commercial Rent Arrears In The Wake Of COVID-19 ' A Guide For Landlords

• Published date: 03 February 2022
• Subject Matter: Real Estate and Construction, Coronavirus (COVID-19), Landlord & Tenant - Leases, Government Measures
• Law Firm: Ansons Solicitors
• Author: Louise Palmer

As a result of the COVID-19 pandemic and the restrictions imposed on a number of businesses preventing them from opening their premises, many tenants of commercial properties suffered a significant decrease in their ability to generate income making it difficult for them to meet their financial obligations, to include payment of their rent.

Whilst government guidance always encouraged tenants to make payment when they were able to do so, and to communicate with their landlords in relation to any arrears, often arrears continued to accrue and, with a moratorium in place preventing landlords from exercising their right to forfeiture for non-payment of rent until March 2022 and restrictions on use of the Commercial Rent Arrears Recovery process, the only available route for recovery of any arrears was a money claim through the Court.

Given the unprecedented nature of the COVID-19 pandemic, there has been some dispute as to the liability of tenants for the rent accrued as a result of it, however, three recent decisions of the High Court herald good news for Landlords as it is confirmed that rent arrears, whether caused by the pandemic or not, may be pursued by way of a Court claim with good prospects of success.

The first two cases, Commerz Real Investmentgesellschaft mbh v TFS Stores Ltd [2021] EWHC 863 (Ch) and Bank of New York Mellon (International) Ltd v Cine-UK Ltd [2021] EWHC 1013 (QB), establish that the tenant's liability for rent continues notwithstanding any restrictions imposed as a result of the pandemic.

Further, in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd [2021] EWHC 2591 it was held that the tenant's inability to use the leased premises for its permitted purpose did not suspend the requirement to pay rent and service charge nor did it amount to a failure of consideration, whereby the tenant argued that it had not received what it had bargained for pursuant to the lease. The Judge...