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LTA 1954: Pandemic Clause Not Included In Terms Of Renewal Lease (County Court)

Reasons to choose Wilson Browne

The County Court has refused the tenant’s (T) proposal to include a clause in the renewal lease (pandemic clause) which would reduce the rent and service charge payable by 50%, in the event of a government-imposed lockdown.

T argued that the inclusion of the pandemic clause would modernise the lease following the lockdowns experienced during the COVID-19 pandemic and sought to rely on the case of WH Smith Retail Holdings Limited v Commerz Real Investmentgesellshaft mbH.

The landlord (L) resisted the pandemic clause on the basis that there was no market precedent for this drafting and that it would fundamentally change the parties’ relationship.

The County Court agreed with L, stating that, in line with the principles set out in O’May v City of London Real Property Co Ltd, the imposition of a pandemic clause would not be fair and reasonable in the circumstances. The purpose of the Landlord and Tenant Act 1954 was not to rewrite previously negotiated risks, even though the parties had not considered a national lockdown at the time of negotiation. It would be unreasonable to impose a sharing of the risk in circumstances over which L would have no control, while T may have some control by reference to government reliefs or schemes.

This case could be differentiated from WH Smith as, in that particular case, the parties had already agreed that a pandemic rent suspension clause should be included in the lease and the court was simply determining the mechanics of how it would operate.

T also proposed varying the existing forfeiture clause to include a proviso that L could not forfeit the lease during a lockdown period. The County Court rejected this variation on the basis that it would significantly alter the existing commercial balance between the parties by transferring a proportion of T’s risk to L.

While this is a County Court decision, which therefore has no binding effect on future cases, it is an interesting example of how the COVID-19 pandemic has affected lease terms.

For advice on leases and renewals contact our Legal 500 recognised Commercial Property team today on 0800 088 6004.

Case: Poundland Ltd v Toplain Ltd (unreported), 7 April 2021, (County Court) (DJ Jenkins).

Tom Warrender

Posted:

Tom Warrender

Partner

Tom is a Solicitor and Partner with 15 years + experience advising clients in relation to commercial property matters. A Legal 500 recognised lawyer, Tom is a member of SHLA and CRELA, sits on our Board of Management & Heads our Social Housing Team.