Pandemic rent arrears: First award given in favour of the landlord

The first award under The Commercial Rent (Coronavirus) Act 2022 - a binding arbitration scheme for landlords and tenants to resolve disputes over commercial rent arrears accrued during the COVID-19 pandemic - has now been published and offer a positive indication for landlords says commercial property agent, Prop-Search.

In the first case, London property fund manager First Property Group has won nearly half a million in rent arrears from the operator of H. Samuel and Ernest Jones – Signet Trading - after the jewellers withheld payment during pandemic restrictions.  

Signet Trading applied for relief from payment of rent arrears for office premises in Borehamwood, Hertfordshire after its main retail jewellery business was forced to close with Government regulations at the time requiring a business of offering goods for sale or hire in a shop to cease carrying on that business subject to certain exceptions, such as delivery services.

The staff working at the company’s office premises were instructed to work from home.  The majority of those staff were subsequently placed on furlough with only 35 members continuing to work at home during the pandemic and only two members of staff remained in the offices; a post room worker and a security guard.

The question for the arbitrator was whether or not the tenancy was “adversely affected by the coronavirus”, such that the rent payable was a “protected rent” under the Act.  When handing down the ruling, the Judge said that although its retail stores had been protected under the act, its offices were not.  He also added that that because there remained two workers in the office, while the rest of staff worked from home, the office space “was not adversely affected by coronavirus” and that there is “no protected rent debt in this case.”

Samantha Jones, an Associate Director of Prop-Search, said: Too many businesses have tried to use the cover the Act to avoid paying rent that was rightfully due.  This case signals that even if a tenant’s main business has been subject to a closure requirement and is not operating, if other parts of the business have not been subject to the same closure requirement, those parts may well still be liable for the rent.”

Since it is approximately five months since the Commercial Rent (Coronavirus) Act 2022 was introduced unless there is an extension by the Secretary of State, an referrals must be made by 23 September 2022.  

Samantha concludes: “Any party eligible to use the scheme should now consider whether it is in its commercial interests to get a referral in before the deadline, or wait for the remaining restrictions on enforcement action for protected rent debts to fall away.”