Landlord Wins Claim Against Tenant For Pandemic Rent Arrears

• Published date: 26 April 2021
• Subject Matter: Real Estate and Construction, Coronavirus (COVID-19), Landlord & Tenant - Leases, Government Measures
• Law Firm: Stevens & Bolton
• Author: Ms Naomi Campbell

The landlord of Westfield London has won an early victory in a case against their tenant TFS Stores Limited for payment of rental arrears dating back to April 2020, together with service charge. This is the first reported judgment where a landlord has sued its tenant for non-payment of rent during the COVID-19 crisis.

The landlord obtained an order for summary judgment against its tenant on the basis that it had no real prospect of defending the claim to recover the rental arrears and there were no compelling reasons why the claim should go to a full trial. While there was no full trial, various arguments were raised by both sides which present points of interest. In particular, whether the tenant's obligation to pay rent during lockdown should be suspended when the landlord has the benefit of insurance for loss of rent, even if this is not explicitly provided for in the lease.

This may not be the last we see of this case as TFS tried to adjourn the hearing at short notice and amend their Defence, which they were not permitted to do. If TFS decides to appeal the judgment against them, we would expect to see a revised Defence, likely expanding on the arguments around the proper interpretation of the rent cesser clause in the Lease.

Detail

TFS Stores Limited (TFS) is the tenant of premises at Westfield London under the terms of a five year lease dated 10 July 2019 (Lease). TFS trades as "The Fragrance Shop". Commerz Real, the fund manager which owns the Westfield Centre in a joint venture with Unibail-Rodamco-Westfield, is TFS' landlord (Landlord). The rent due under the Lease was '200,000 per annum excluding VAT, although the parties varied this by a side letter to provide for a Base Rent of '180,000 plus Turnover Rent.

TFS were obliged to close the premises under the government's coronavirus restrictions from 26 March 2020 to 15 June 2020. The premises were then closed again between 5 November and 2 December 2020 and then from 19 December 2020 until 12 April 2021. TFS paid no rent after April 2020, and there were also some arrears of service charge. The Landlord issued a money claim seeking payment of '166,884.82 (inclusive of VAT) plus interest. TFS defended the claim on three broad grounds:

1. That the Landlord was in breach of its obligations under the government's "Code of Practice for commercial property relationships during the COVID-19 pandemic";
2. That the Landlord was exploiting a "loophole" in the coronavirus legislation which was designed to...