COMMERCIAL LEASE DISPUTES AND RENEGOTIATION
CD: What have been among the most common causes of disputes in connection with commercial leases over the past 12 months or so? How would you characterise the impact of the coronavirus (COVID-19) pandemic in this regard?
Clifford: In the UK, there has been a resurgence in the last year of commercial rent arrears court proceedings. This is particularly prevalent in light of two important High Court decisions in Commerz Real v. TFS Stores and Bank of New York Mellon (International) Limited v. Cine-UK Ltd and others, which awarded summary judgment to the landlords for all of the arrears. The pandemic has impacted a vast cross section of tenants across the industry, particularly in the hospitality and retail sectors. In this regard, the pandemic has accelerated changes which were already on the horizon, with a movement to turnover rent models and greater emphasis on online retail. It has been estimated that there will be £7bn of commercial rent arrears alone by June 2021. That is unprecedented and is having a colossal impact across the industry.
Langerak: There were two primary drivers causing lease disputes over the last 12 months. First, the US government-ordered closures. Those orders compelled tenants to shutter and, obviously, impacted tenant income streams and the tenant-perceived utility of its space. Second, the voluntary avoidance by customers and employees of the businesses in commercial space even after government closures lifted, in full or in part. Those drivers caused tenants to quickly see little value in their commercial space, at least for some period of time, and they, in turn, looked to landlords through lease terms or other legal doctrines to obtain some relief from rent or reopening. Obviously, those requests and objections to paying rent ran contrary to landlords’ mostly unabated obligations to pay their lenders and keep the commercial space in good order.
Jul-Sep 2021 issue
Ashurst LLP
Stephensons Solicitors LLP
Stoll Keenon Ogden PLLC
White and Williams LLP