6th May 2021
David Manda and Lewis Couth, Walker Morris’ Real Estate Litigation specialists, explain recent High Court decisions concerning Covid-related rent arrears, and offer practical advice for commercial landlords and tenants.
Commercial landlords and tenants alike should be aware of the High Court’s two recent decisions in claims brought by landlords against tenants Cineworld, Mecca Bingo, Sports Direct  and The Fragrance Shop , for rent arrears accrued during the Covid-19 pandemic.
In both cases, despite a plethora of arguments being advanced by the tenants, the landlords’ claims for rent and service charge arrears succeeded in full, and at summary judgment.
The cases clearly demonstrate that:
Looking at the largely standard-form terms within the various leases that were the subject of these claims, the High Court gave short shrift to all of the arguments advanced by the tenants in these cases. Landlords and tenants should therefore note:
In terms of practical implications, these recent cases are likely to encourage both parties to come to the table to negotiate. The clear threat of summary judgment action should deter the ‘can pay, won’t pay’ tenants from being deliberately obstructive or evasive when it comes to paying arrears especially where the court has soundly rejected the numerous arguments in short space of time and at summary judgment level.
From a commercial perspective, the more collaborative approach of negotiating with tenants who are genuinely struggling as a result of the economic impact of the pandemic can result in both more flexible solutions than a court claim could allow, and it can bring about more and additional benefits for landlords in the long term (the fostering of positive landlord and tenant relationships, lower risk of forfeitures and voids, preservation of rental values and positive comparables, and so on).
Whilst there is little doubt that a mutually-acceptable negotiated solution is likely to remain the most commercially sensible option for both landlords and tenants in many cases, the landscape of post-Covid commercial lease remedies is in flux. It will be interesting to see how the Government proceeds with the withdrawal or replacement of existing restrictions on landlord’s remedies, following its current call to evidence, which closed on 4 May 2021. Walker Morris will monitor and report on any key developments.
Walker Morris’ dedicated Real Estate Litigators are experienced and expert in acting for both landlords and tenants, and in resolving all types of commercial lease disputes. If you would like any advice in connection with pursuing or defending a Covid-related arrears claim, or if you would like any assistance with the conduct or resolution of any commercial settlement negotiations, please do not hesitate to contact David Manda, Lewis Couth or any member of the Real Estate Litigation team.
 Bank of New York Mellon (International) Ltd v Cine-UK Ltd and related cases AEW UK REIT Plc v Mecca Bingo Limited and v Sports Direct.com Retail Ltd  EWHC 1013 (QB)
 Commerz Real Investmentgesellschaft mbh v TFS Stores Limited  EWHC 863 (Ch)
 such as forfeiture and the service of statutory demands to force payment under threat of insolvency
 M&S v BNP Paribas  UKSC 72
 Frustration may occur where an unexpected event, that is the fault of neither party, takes place after the contract has been formed and is so fundamental as to go to the root of the contract and to render further performance impossible, illegal or radically different from that which was contemplated by the parties at the time the contract was made