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Recovering Rent and Service Charge Arrears

In the recent case of Commerz Real Investmentgesellschaft MBH v TFS Stores Ltd [2021] EWHC 863 (Ch), the High Court ordered that the tenant had to pay its rent and service charge arrears even in circumstances where the arrears had been incurred since April 2020 whilst the Government’s COVID-19 measures restricted the tenant’s ability to trade.

Background

The tenant had been obliged to close its shop at the Westfield Shopping Centre due to the Government’s lockdown restrictions relating to the COVID-19 Pandemic. The tenant had not paid any rent since April 2020 and had not paid the monthly service charge for April, May and June 2020.

The landlord brought Court proceedings to recover the outstanding rent and service charges. The tenant sought to defend the landlord’s claim on the grounds that:

  • The Court proceedings had been issued prematurely contrary to the Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic (the Code).  
  • The landlord was exploiting a loophole in the restrictions put in place by the Government to prevent forfeiture, winding up and use of commercial rent arrears recovery (CRAR).  
  • There was an implied term in the lease that the landlord would insure for, and claim on insurance for, loss of rent and service charges due to forced closures or denial of access due to notifiable disease or government action.  

The landlord issued a summary judgment application in respect of the tenant’s defence. Summary judgment is a procedure by which the Court may decide a claim or a particular issue without a trial. The summary judgment procedure aims to promote the quick determination of cases, avoid long-running litigation, and save costs.  

The Court’s Decision

The Court held that the Code did not vary or suspend the contractual terms of the lease. Furthermore, although the Government had restricted some measures available to landlords (forfeiture, winding-up and CRAR) in respect of non-payment of rent and service charges, there was no restriction on a landlord issuing Court proceedings for unpaid rent and service charges and seeking summary judgment on such claims.  

On the insurance point, the Court held that the obligation to pay rent was only suspended if there was physical damage to the premises, which did not apply in this case. The Court further held that there was no basis for implying the terms the tenant argued or for construing that rent suspension provisions applied in the event of the premises being closed due to a legal requirement.  

The Court’s decision, in this case, will be welcomed by landlords as it confirms that landlords can still issue Court proceedings for non-payment of rent and other payments payable pursuant to a lease. This is irrespective of other temporary measures introduced by the Government to protect tenants during the COVID-19 Pandemic. 

This case also serves as a useful reminder for tenants to arrange for their own business interruption insurance. 

Here to Help

If you are a landlord and you need help recovering rent, service charge and other arrears payable pursuant to a lease, please do not hesitate to contact a member of our Commercial Litigation Team on 0161 941 4000 or email The Myerson Solicitors Commercial Litigation Team.