Covid rent arrear defences fail

In the second decision in as many weeks on COVID rent arrears, the High Court has again refused to find merit in the defences advanced by a number of tenants in a claim brought by their landlords Bank of New York Mellon (International) Limited and AEW UK REIT PLC, where the judge gave a detailed decision in favour of the landlords.

The cases concerned non-payment of rents throughout the Pandemic. The tenants sought to defend non-payment of rent on the following grounds

1. The Rent Cesser clause in the lease applied in the case of the Pandemic – either expressly or impliedly;
2. The Government’s guidance requiring landlords and tenants to consult as to rent suspension and similar measures and in the absence of negotiation Court proceedings could not be brought
3. Frustration, suspensory frustration, supervening illegality and or temporary failure of consideration

The Court preferred the Landlord’s arguments in relation to each of these points and found that none of these defences had any reasonable prospect of succeeding at trial and awarded summary judgment to the landlords. In very simplistic terms –

1. there could be no Rent Cesser as there was no physical damage to the property and once that position had been reached all other arguments failed to succeed;
2. The Government’s guidance is voluntary and is outside the litigation process, and had no relevance where, as in this case, the tenants were not asserting that they were unable to pay.
3. None of the lockdown measures have made it illegal to pay the rent and so the arguments as to frustration, suspensory frustration, supervening illegality or the temporary failure of consideration would not succeed.

At the end of his judgment Master Dagnell recognised that the Pandemic and the ensuing COVID regulations have been unprecedented and that it is impossible not to feel sympathy for tenants who have been denied the ability to trade. However, adopting wording from the judgment in TKC v Allianz, concluded it was not the place of the Courts to adapt principles of contractual interpretation and implication to unprecedented circumstances. That was for Parliament to do.

“In times of uncertainty the law must provide a solid practical and predictable foundation for the resolution of disputes and the confidence necessary for an eventual recovery … Contractual rights are to be evaluated by applying settled principles to the contract in question. Legal certainty remains paramount and gives the surest basis for resolution”

This is another decision that will be welcomed by Landlords faced with mounting rent arrears and should lead to engagement between the parties as to an amicable way forward.