Judgments have been handed down awarding landlords summary judgment against their tenants for non-payment of rent during the Covid-19 pandemic, finally giving some judicial commentary on the defences raised by tenants regarding their rent obligations.
The first reported judgment was Commerz Real Investmentgesellschaft mbH v TFS Stores [2021] EWHC 863 (Ch). The tenant argued that the landlord’s claim was contrary to the Code of Practice for Commercial Property Relationships during the Covid-19 pandemic. The court confirmed a landlord is entitled to bring a claim for unpaid rents and that the code does not suspend or vary the parties’ obligations under the lease.
The tenant also argued the landlord was in breach of its insuring covenant by failing to insure against loss of rent or a notifiable disease, and had it done so, then the rent cesser clause would have been triggered. The court found a landlord is only required to insure against the risks set out in the lease and nothing more. Further, any loss of rent would cover loss caused to the landlord and not the tenant, and the rent cesser clause would only have been triggered if there had been physical damage to the property.
In Bank of New York Mellon (International) v Cine-UK and others [2021] EWHC 1013 (QB), the tenants also raised arguments relating to “temporary frustration”, implied rent cesser clauses and illegality. The court found that there was no implied term that would suspend rent payments during the pandemic. The court confirmed that there is no concept in law of ‘temporary frustration’, which would suspend the parties’ contractual obligations, and illegality of trading does not restrict tenants from paying rent.
Following these judgments, there seems little scope for tenants to argue against payment of their commercial rents due to the pandemic.
Alison Willis is managing associate at Freeths
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