Commerz Real Investmentgesellschaft MBH v TFS Stores Ltd  EWHC 863 (Ch), April 16, 2021
August 19, 2021
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Coronavirus – Commercial lease – Rent arrears – Brief judgment – Code of conduct for commercial real estate relationships
The complaining landlord was the main tenant of the Westfield Shopping Center (L). The defendant rented one of the units (T). As a result of the COVID-19 pandemic, T was forced to close its shop during the lockdown. T had not paid rent since April 2020 and had significant ancillary costs outstanding. L made a claim and later a summary judgment motion for the arrears, interest and charges.
T defended the motion for a preliminary ruling on four grounds, arguing that (1) the lawsuit was inconsistent with government guidelines in the Code of Conduct on Industrial Property Relationships During the COVID-19 Pandemic (“the Code”); (2) the demand was a means of evading measures to prevent forfeiture, liquidation and recovery, and its pursuit was to exploit a “loophole” in government-imposed restrictions on rent collection; (3) L was obliged to maintain rental loss insurance due to a notifiable illness and / or an official measure and had to take advantage of the rental loss insurance before a procedure to collect the rent was initiated; (4) The rental agreement provisions in the rental agreement, interpreted correctly, apply to the COVID-19 pandemic, which is equivalent to an intermittent event in the sense of the rental relationship.
Chief Master Marsh granted L’s motion for a summary judgment.
The captain stated that the code does not affect the legal relationship between landlords and tenants. While the Code encouraged landlords and tenants to be balanced, it was not a charter for tenants who refuse to pay rent. Furthermore, the Code was not a good reason to bring the lawsuit to court, as L had studied the Code and any lack of commitment was on T’s side.
The restrictions imposed by the government did not extend to petitioning for a monetary judgment for unpaid rent. There was no basis to restrict L’s right of access to the court or the power of the court to make a summary assessment of a claim under the CPR.
In the actual execution of the lease, L was not obliged to take care of L’s loss of business. In addition, the provisions of the rental administrator only apply to property damage to the premises. There was no basis for an interpretation of these provisions in the event that the facility and / or the premises are closed due to a legal requirement. Disclosure and trading obligations were suspended, but that was another matter.
The master stated that L had assumed the burden of proof that the rents were due and that T had no real prospect of defending the claim. He clarified that the context in which the claim was made did not entitle T to argue that these principles were now part of an evolving area of law. T could neither point to a behavior by L that could be viewed as suppressive, nor to a premature filing of a lawsuit. In these circumstances, L was entitled to a decision under Part 24 of the CPR.
The ruling makes it clear that tenants who have not paid rent and have not meaningfully engaged will be poked by the court. However, the Master’s reasoning suggests that if the tenant had paid part of the rent and / or negotiated more sensibly with the landlord, the court might take a different view, so watch out for this area.
The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.
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