Business Tenancies: Assessing viability of tenant’s business and whether a rent debt was payable (TPIF (Portfolio No 1) GP LLP (1) TPIF (Portfolio No1) Nominee Ltd (2) v Nuffield Health [2022])

This arbitration considered ss.15 and 16 of the Commercial Rent (Coronavirus) Act 2022, assessing the viability of the tenant’s business and its eligibility for grant of relief from payment of a protected rent debt.

The background

The arbitration of TPIF (Portfolio No 1) GP LLP (1) TPIF (Portfolio No1) Nominee Ltd (2) v Nuffield Health [2022] concerned commercial premises owned by the freeholder and let to the respondent company and registered charity. The landlord’s referral to arbitration sought to recover rent debt of £585,248.49.

The landlord had received no response from the tenant to its notice of intention. The arbitrator found that the tenant had chosen not to engage with the arbitration, and concluded that an award should be made to the landlord.

Arbitrators must dismiss referrals which do not meet the following criteria, making them eligible for relief:

1. The parties have not resolved the dispute themselves prior to referral to arbitration
2. The referral relates to a business tenancy
3. The referral relates to a protected rent debt
4. The tenant’s business is viable, or would be viable if relief from the protected rent debt is given.

The decision

The arbitrator considered the eligibility criteria and determined that no relief was to be given to the tenant, finding that the tenant’s business was viable and that refusal to grant relief would not prejudice such viability. Full payment of the debt was to be made by the tenant.

Protected rents arise where the business tenancy was adversely affected by coronavirus insofar as it was subject to closure during the pandemic, and where rent applies to a protected period of occupation by the tenant. Both applied in this case, and the rent was a protected rent debt.

The tenant had failed to engage with the arbitration, and the arbitrator had little information to refer to in respect of the tenant’s business viability. However, with reference to the Companies House information available, the arbitrator determined that the tenant’s business was viable, and remained viable following the 2021 pandemic lockdown.

Grant of relief from a protected rent debt is made in order to preserve the viability of the tenant’s business, provided the landlord’s solvency is also preserved. The tenant is otherwise required to make payment of rent in full. The arbitrator was satisfied that the tenant’s business remained viable without a grant of relief, and was to pay the rent due in full. Further, and as a result of its failure to engage in the process, the tenant was to pay the landlord’s arbitration fees.

Advice and action for landlords

This decision provides valuable reassurance to landlords whose tenants operate viable businesses but remain in rent debt following the pandemic.

Applying the eligibility criteria for grant of relief from payment, the tenant’s failure to present any evidence to the contrary led to a decision of business viability by the arbitrator and further resulted in a direction to pay the landlord’s arbitration fees.