Since March 2020 the Covid-19 pandemic has had a significant impact on businesses. In an effort to protect business tenants, the Government passed legislation in the form of the Coronavirus Act 2020 which contains protective measure preventing landlords’ ability to recover outstanding rents.
The High Court has granted a summary judgment in favour of a landlord for a tenant’s non-payment of rent and service charges due under a lease irrespective of the COVID-19 pandemic and the Government’s restrictions on the remedies available to landlords.
In ordinary times this judgment would probably have not been particularly news worthy; but in light of the COVID-19 pandemic it is of particular interest and importance.
Whilst the Government have introduced various restrictions since the start of the pandemic on what remedies are available to a landlord in relation to any unpaid rents, those rents remain due, unless the landlord and the tenant agree otherwise.
Here, the landlord issued a claim for summary judgment against its tenant for unpaid rent of £2.9 million. The rent and service charges had not been paid by the tenant since June 2020. The tenant had to close its cinema, like many others in entertainment and hospitality, for large periods of time because of the Government restrictions.
The Tenant defended the Landlord’s claim for arrears by arguing that:
- Terms should be implied into the leases suspending payment of rent and service charges when use of the premises as a cinema was illegal or the attendance would not be at a level commensurate with that anticipated when the leases were granted.
- There was partial failure of consideration: payments under the leases were for the use of the premises as a cinema, so no payments were due for periods when the premises could not be so used.
These arguments were rejected by the Court who stated that “the Defendants have no real prospect of defending the claim.”
The Court also dismissed an earlier application by the tenant to adjourn the summary judgment application on the basis of the Government’s recent announcement that it intends to legislate for a binding arbitration scheme relating to rent arrears.
There will be many businesses in the same situation as the tenant in this case facing significant rent arrears, especially those operating in the hospitality and entertainment sectors where venues have had to remain closed or have been subject to restrictions during the pandemic.
Landlords are expected to welcome the Court’s decision as it highlights that rent claims and related summary judgments continue to be a viable remedy in situations of this nature, despite the temporary restrictions on enforcement action by forfeiture and winding-up petitions for commercial rent arrears until at least March 2022.
If you are a landlord or tenant and you are experiencing difficulties with repaying or enforcing payment of rents, please review our other articles detailing the options available and do not hesitate to call for more detailed and case specific assistance.
The full judgment can be found here
Correct at the time of drafting
30 September 2021