Article written by Jennifer Hartley, Solicitor, Myerson Solicitors, Property Litigation department
The Commercial Rent (Coronavirus) Act (the Act) is a new piece of legislation drafted by the government to enable ‘relief from payment of certain rent debts under business tenancies adversely affected by Coronavirus’. The Act came into force on 25 March 2022.
The Act allows rent arrears that fell due under certain tenancies to be ‘ring-fenced’ if they relate to periods of time during which the tenant’s business was subject to mandatory COVID-19 closures. Landlords cannot reclaim these protected arrears through the usual means and instead must go through an arbitration process to split the cost fairly with the tenant.
The arbitration scheme applies in England and Wales, although other parts of the Commercial Rent (Coronavirus) Act apply to Scotland and Northern Ireland.
On 11 July 2022, Falcon Chambers Arbitration published its first Award finding that a jewellery retailer could not obtain relief under the Act for rent accruing under the lease of its registered office.
Background
In Signet Trading Limited (the Tenant) v (1) Fprop Offices (Nominee) 4 Limited and (2) Fprop Offices (Nominee) 5 Limited (the Landlord), the Tenant applied for relief from payment of rent arrears for its registered office in Borehamwood, Hertfordshire.
The Tenant and its subsidiaries occupied approximately 450 retail premises across the UK, selling jewellery and watches and providing associated services such as ear piercing. On 23 March 2022, due to the pandemic, the Tenant closed all retail outlets.
The premises to which the dispute related was the Tenant’s registered office (the Office), which was used entirely as office premises. The staff from the Office were required to work from home. The majority of staff were placed on furlough and only 35 members of staff from the Office worked from home during the pandemic with only 2 members of staff on site.
The question, in this case, was whether or not the tenancy for the office premises was adversely affected by coronavirus and whether the rent payable was deemed to be protected rent under the Act.
The Act sets out that rent is protected if the tenancy was adversely affected by coronavirus (i.e. the premises were required to close), and the rent is attributable to a period within the protected period.
The Decision
The Arbitrator found that the business carried on by the Tenant at the Office was not subject to a closure requirement. The Act focuses on premises that were required to close by law, which in the case of retail meant the shops, not the offices. This meant that the rent was not deemed to be protected rent.
The decision is important as it may stop tenants from relying upon the Act as a way of securing relief from rent arrears relating to office premises.