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Protected rent debts

Can retailers claim their Head Office rent arrears are “protected rent debts” under the Commercial Rent (Coronavirus) Act 2022?

It was argued by Ernest Jones and H Samuel, (and its parent company Signet Trading Limited), that because they are a retail business, and because the purpose of its office premises in question was to support that retail business, the office premises were subject to a closure requirement for the purposes of Commercial Rent (Coronavirus) Act 2022 (“the 2022 Act”). Subsequently the rent arrears in relation to this office premises were “protected rent debts” and they could claim relief from payment.

The Landlord in this case argued that the requirement to close only applied to the Tenant’s retail shops and did not apply to office premises which were not, at any stage, required to close.

The arbitrator was very clear. Whilst it was accepted that the retail business carried on at the tenants stores and shops were the subject of a closure requirement under the 2022 Act, the business carried on by the tenant specifically at the premises with which the reference was concerned was not subject to a closure requirement. Accordingly it was found that it was not adversely affected by coronavirus for the purposes of s.4 of the 2022 Act. Given that such a requirement is a prerequisite of a “protected rent debt” for the purposes of s.3 of the 2022 Act, it followed that there was no protected rent debt in this case.

We always felt that it was unlikely that the relief afforded by the 2022 Act could be claimed for an office of a retailer and this award supports this view. Albeit not necessarily binding precedent, this reasoned award perhaps indicates the view that other arbitrators may take in similar claims.

In reality, the trading environment has made it incredibly difficult for retailers to pay their rents across their portfolios. We have seen in the vast majority of cases the Landlord and Tenant working together to resolve this crisis and agree rent payments for both Head Offices and Stores outside of the 2022 Act.

Read the full FCA report.

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Amanda French

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Bristol
Amanda specialises in portfolio management and store development programmes for multi-national retail businesses. She is also experienced in managing investment portfolios.
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