The High Court has given judgment on Westfield's summary judgment application against The Fragrance Shop for rent arrears owed since the COVID-19 pandemic hit. The Court examined a number of interesting issues in Commerz Realinvestmentgesellschaft mbh v TFS Stores Limited  EWHC 863 (Ch) - including the landlord's obligation to insure and the rent cesser provisions within the lease - but it is clear that the clock is ticking for any commercial tenants who are still seeking to delay agreeing repayment arrangements with their landlords.
In relation to the tenant's various defences in this case:
- The argument that the claim had been issued prematurely was rejected on the evidence - there had been significant engagement by the landlord before issuing the claim and, if anything, the lack of engagement was on the tenant's side.
- The Court dismissed the tenant's suggestion that the issue of the claim was contrary to the Code of Practice for Commercial Property Relationships during the COVID-19 Pandemic, noting that the Code "is not a charter for tenants declining to pay any rent".
- The Court was similarly unpersuaded by various arguments based on the lease clauses relating to the landlord's insurance obligations and rent suspension arrangements. Aside from the fact that the lease did not require the landlord to insure against loss of rent due to forced closures and/or denial of access due to notifiable disease and/or government action, the Court noted that there was no obligation for the landlord to insure the tenant's business against loss. The Court pointed out that:
"…there is no obvious reason why, even if it were possible to do so, the [landlord] should wish to obtain cover against losses to the [tenant's] business. Such losses are for the [tenant] to insure."
The Court also found no basis to support the view that landlords' right of access to the court, or the courts' powers, should be restricted - despite the other measures put in place by the government to restrict landlords' remedies for recovering rent arrears.
This decision is not unexpected and landlords will be pleased to see the High Court's willingness to deal with the matter via summary (i.e. early) judgment. The Master noted that there were no new principles of law here and that the issues raised by the tenant could be resolved by applying the well-established principles which govern the construction of contracts and implication of terms. He noted that:
"The context in which the claim is made does not entitle the [tenant] to contend that these principles are now part of an area of developing law. Equally, the [tenant] is not able to point to any conduct on the part of the [landlord] that might be regarded as oppressive and that the claim has been issued prematurely."
Those landlords and tenants of commercial property who are still negotiating over rent arrears which accrued during 2020 will want to take note of this judgment, particularly in light of the government's recent call for evidence concerning these negotiations (see https://blog.charlesrussellspeechlys.com/post/102gvd1/how-will-the-commercial-property-market-exit-covid-19-restrictions )
Despite the success for the landlord here, landlords will want to take note of the importance of engaging with their tenants before issuing any claim - as well as undertaking a careful check of the relevant provisions of their leases. For tenants, the judgment makes it clear that the courts are ready to accept these types of claim and that they intend to deal with them efficiently. Here, the tenant's efforts to stall this judgment - including an application to adjourn the hearing - were rejected by the Court. In balancing the parties' interests, the Court noted that no payment of rent been made by the tenant for 12 months and it was not prepared to allow the likely 2-3 month further delay which would result from any adjournment.
Chief Master Marsh said: “As part of the measures taken to protect the economy, the government has placed restrictions upon some, but not all, remedies that are open to landlords. There is no legal restriction placed upon a landlord bringing a claim for rents and seeking judgment upon that claim.”