Landlord entitled to unpaid rent despite tenant’s Covid defence

A commercial landlord has won a dispute over unpaid rent of more than £166,000 despite the tenant citing Covid-19 as the reason for its failure to pay.

Stephanie Johnson Senior Associate Solicitor reports on this recent case.

The case involved Commerz Real Investmentgesellschaft MBH and TFS Stores Ltd.

Commerz was the leasehold owner of the Westfield Shopping Centre. TFS was the tenant of one of the units in the centre under a five-year lease.

As a result of the Covid-19 pandemic, TFS had been obliged to close its shop between 26 March 2020 and 15 June 2020. It was then closed again between 5 November 2020 and 2 December 2020 and from 19 December 2020 until 12 April 2021.

It had not paid any rent since April 2020 and the monthly service charge for April, May and June 2020 was also outstanding.

Commerz sought judgment for rent amounting to £166,884.82 (inclusive of VAT) and interest at the contractual rate.

TFS argued that the claim was issued prematurely contrary to the Code of Practice for Commercial Property Relationships during the Covid-19 Pandemic and was a means of circumventing measures put in place to prevent forfeiture, winding up and recovery.

It further submitted that Commerz was trying to exploit a “loophole” in the restrictions placed upon the recovery of rent put in place by the Government because of Covid. 

The High Court found in favour of Commerz.

It held that it was clear from the first paragraph of the Code that it did not affect the legal relationship between landlord and tenant. It was also clear that the Code encouraged landlords and tenants to take a balanced view. The Code was not a charter for tenants declining to pay any rent.

The government had placed restrictions upon some, but not all, remedies that were open to landlords as part of the measures taken to protect the economy. However, there was no legal restriction placed upon a landlord bringing a claim for rents and seeking judgment upon that claim.

There was no basis for concluding that a landlord’s right of access to the court, or that the court’s powers were restricted.

If you would like more information about the issues raised in this article please contact Stephanie on 01228 516666 or click here to send her an email.