Restrictions introduced by the government over the last year or so as a result of the COVID-19 pandemic have meant that landlords looking to pursue rent arrears have been left with few options. However, two recent summary judgment cases have confirmed that the main remaining option of pursuing a debt claim does still have teeth and that summary judgment can be obtained against many lockdown based arguments from tenants.
Commerz Real Investmentgesellschaft MBH v TFS Stores Ltd
In the first of the two cases, judgment was provided on 16 April 2021. TFS Stores failed to pay rent and service charges relating to a lease of retail premises at Westfield Shopping Centre in London. After issuing a claim for arrears of £166,884.82, the landlord made a summary judgment application. In response, the tenant argued that:
- The claim had been issued prematurely contrary to the Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic;
- In issuing a claim, the landlord was attempting to exploit a loophole in the restrictions put in place by the Government relating to rent arrears;
- It was reasonable to expect the landlord to be responsible for insuring against loss caused by forced closures and/or denial of access due to notifiable disease or government action.
However, the court held in favour of the landlord, concluding that whilst the Government had restricted some remedies, it was still open to landlords to issue a claim for rents and seek summary judgment on that claim. The court also commented that the Code of Practice was “not a charter for tenants declining to pay any rent”.
Bank of New York Mellon (International) Limited v Sports Direct and Others
The judgment in the Sports Direct case was handed down less than a week later, on 22 April 2021, and also involved an unpaid rent claim with the landlords making an application for summary judgment. Similarly to the TFS Stores case, the court rejected all arguments put forward by the tenants as having no reasonable prospects of success and summary judgment was granted. The court concluded that there were no grounds for a tenant to withhold rent because of lockdown closures, reduced footfall and loss of business. Nor was it the landlord’s responsibility to insure against these issues for the tenant’s benefit.
Please note, the tenants in the Sports Direct case were granted until 7 May 2021 to appeal the summary judgment.
These two cases are likely to bring comfort to many landlords that would have struggled to pursue unpaid rent and have faced novel arguments from tenants to avoid payment (many of whom are large stores that have continued to trade throughout the pandemic). The Government amended the Code of Practice and is consulting on what to do when the moratorium on winding up and forfeiture finally expires but with claims for rent arrears still possible it seems tenants remain under pressure.
This article was written by Trainee Solicitor Brodie Ross, amended by Senior Associate Rachel Gimson. If you would like to discuss the above topic with our talented Property Litigation Solicitors, please email firstname.lastname@example.org or call 01202 786175.