Continuing the fallout of litigation sparked by retail and leisure closures during the coronavirus pandemic, this review considers 4 similar cases decided together by the High Court, all related to rents withheld by tenants whose premises were required to close during the pandemic’s lockdown restrictions and where landlords had obtained ‘pandemic insurance’.
In Bank of New York Mellon (International) Ltd v Cine-UK Ltd and others , four tenants occupied retail and leisure premises which were required to close during the coronavirus pandemic. Each tenant withheld rent from March 2020, at the start of the first national lockdown. Their landlords had obtained ‘pandemic insurance’ prior to the pandemic, covering loss of rents.
The High Court heard the cases together. Tenants presented different arguments, although each was able to rely on the others:
The High Court found in favour of the landlords, dismissing each tenant argument.
In considering frustration of the leases, the Court found no rationale for the temporary or permanent suspension of the leases. The pandemic could be classed as an event which interrupted the leases, but the Court did not consider this interruption would last for much longer than 18 months. The leases still had at least a year of their term left following this period and they were protected by security of tenure provisions under the Landlord and Tenant 1954. The shorter-term nature of the closures weakened the tenants’ cases.
Advice and action for landlords
Cases so far relating to the pandemic and the effect on commercial rents have been decided in landlords’ favour, and this decision is no different.
Whilst landlords obtained insurance to cover damage or destruction, and ‘pandemic insurance’, this doesn’t necessarily extend to a loss of rent simply because a tenant chose not to pay the sums due. Tenants have been required to demonstrate proper reasons for their refusal to pay, beyond just an argument relating to the unfairness of paying rent whilst not achieving turnover from their premises.
The High Court found in favour of the landlords. Their priorities were in the ‘bricks and mortar’, and no rent had been ‘lost’ in these circumstances because the premises had not been damaged or destroyed.