The Commercial Rent (Coronavirus) Act (“CRCA”) came into force on the 24 March 2022 with the aim of resolving disputes between tenants and commercial landlord relating to the payment of Covid-19 rent arrears.

The CRCA creates:

(i) a six-month moratorium whereby tenants can apply for relief from payment of pandemic related rent arrears. Such arrears need to have accrued between 21 March 2020 and the date specific coronavirus restrictions affecting the relevant business ended, this is known as the “protected rent debt”; and

(ii) a new arbitration process that can be accessed by tenants and landlords if they have been unable to agree between themselves what relief (if any) should be granted to the tenant.

The first arbitration award made under CRCA has been published in the case of Signet Trading Limited v First Property Group Plc. The case concerned the well-known jewellery retailer H. Samuel who sought relief in respect of the rent on its registered offices, arguing its offices were affected by Covid-19 closure requirements in addition to its 300 retail stores.

The rent arrears accrued under the lease of the offices totalled 448,034.04 plus interest. The tenant and its landlord disputed whether the arrears were a “protected rent debt” within the purpose of CRCA.

H. Samuel argued that the business being carried out at the head office supported their retail business, therefore it should fall within the scope of CRCA and be classified as “protected rent debt”.

The arbitrator disagreed with this with argument and dismissed H. Samuel’s case on the grounds that its office accommodation remained capable of occupation. If Covid-19 legislation was to be interpreted in the way presented by H. Samuel it would have created a “two tier system”, whereby offices occupied by tenants whose principal business was the sale of goods in shops would have been required to close, whereas occupiers of offices unconnected to a retail business would not have been. The arbitrator stated this was not the intention in 2020 or subsequently.

Similarly, H. Samuel’s second argument, regarding Covid-19 legislation making it an offence for individuals to leave their place of residence was dismissed. H. Samuel head office remained open throughout, allowing minimal staff to operate the post room and security. This was said to be consistent with there being no closure requirement. Therefore, it was clear to the arbitrator that the rental arrears did not fall within “protected rent debt”.

Conclusion

This decision clarifies that CRCA will offer little protection to office occupiers of businesses forced to close due to Covid-19 legislation. As such, landlords and tenants will need to come to a commercial deal regarding Covid-19 rent arrears.

In addition, this decision comes over halfway through the six-month arbitration period, due to end on the 23 September 2022. As such it is unlikely the floods of referrals originally anticipated from retail tenants will materialise.

Should either landlord or tenant require assistance, please do not hesitate to contact us.​​​​​