COVID-19 And Commercial Tenancies ' The Court's View On Non-Payment Of Rent

• Published date: 07 January 2021
• Subject Matter: Real Estate and Construction, Coronavirus (COVID-19), Landlord & Tenant - Leases, Operational Impacts and Strategy
• Law Firm: William Fry
• Author: Ms Gr'inne Varian, Brian O'Callaghan and Richard Breen

The core issue in Oyster Shuckers Limited t/a Klaw v Architecture Manufacture Support (EU) Limited [2020] IEHC 527 centred around the validity of a lease of a premises operated as a restaurant by the plaintiff (Tenant), and an ability to pay rent. The Tenant stopped paying rent after March 2020 prompting the first named defendant (Landlord) to threaten that it would take possession of the premises and demanding that the Tenant deliver up vacant possession.

The Tenant applied to the High Court (Court) for injunctive relief preventing the Landlord from taking possession. The Landlord's position was that the only valid lease between the parties had expired, and the Tenant was overholding. The Tenant argued that it had the benefit of an alleged lease which had been agreed in November 2018 (Disputed Lease).

In June 2020, the Tenant secured an interim injunction preventing the Landlord from taking immediate possession, largely on foot of the inadvertent moratorium created by the Emergency Measures in the Public Interest (COVID-19) Act 2020 "on all proposed evictions in all tenancies in the State" during the operation of that Act, which we previously reported on here.

The interlocutory injunction application came before the Court in October 2020.

Injunctive relief and breach of covenant

Significantly in this case, the Tenant had made no rent payments since March 2020 allegedly due to the impact of COVID-19 on its business. Even if it secured the injunctive relief sought, the evidence suggested that the restaurant would not re-open until Spring 2021.

Interestingly, the Landlord submitted that rather than seek an injunction preventing the Landlord from recovering possession; where the Tenant maintained that a valid lease existed between the parties, the appropriate remedy was to seek relief against forfeiture. The Landlord claimed that the Tenant "studiously avoided" seeking this relief because of the requirement of a party invoking such relief to pay the arrears under the lease.

The Court noted the importance of the issue raised by the Landlord, as to whether is it possible to grant injunctive relief where the Tenant is in breach of its fundamental obligation to pay rent. However, the Court held there was no authority for the proposition that a tenant in default of rent can never, in any circumstances, get an injunction restraining a landlord from exercising its contractual rights to regain possession.

Non Payment of Rent

The Tenant sought to rely on the rent...