In the recent unreported case of Poundland Limited v Toplain Limited, the Court was once again asked to consider whether a pandemic rent suspension clause should be inserted into a new lease on a renewal under the Landlord and Tenant Act 1954.
Unlike the WH Smith/Westfield case where the Court only had to consider the trigger for the rent suspension, here the inclusion of the rent cesser clause was itself in dispute, as well as a number of other Covid related provisions and amendments to the provisions of the existing lease sought by the tenant.
In its judgment the Court relied on the principle established by the House of Lords in O’May v City of London Real Property Co Ltd. When exercising its discretion to incorporate new terms in a renewal lease, the Court must first consider the terms of the current tenancy and the party seeking to depart from those terms must show that the changes are “fair and reasonable”.
The Judge highlighted that the purpose of the 1954 Act is not to “redesign previously negotiated risks” nor to “insulate the tenant against the commercial and trading risk they may face”.
No Covid clause and very limited changes
Applying this principle, the Court rejected the new terms sought by Poundland:
Relief from compliance with insurer’s requirements during lockdown – The Judge found there was no good reason for such an amendment which could put the entire insurance cover at risk.
The Judge did however agree to the insertion of a new obligation to for the landlord to meet the costs of any works required to comply with the Domestic Minimum Energy Efficiency Standard Regulations 2018.
Is this the end of Covid clauses?
Covid rent suspension clauses have become a regular feature of lease renewal negotiations. And this decision will be welcomed by landlord as it gives them scope to push back on Covid clauses. However, just like the WH Smith case, this is only a County Court decision, which means that it is only persuasive and not binding and may also be the subject of an appeal. So this may not be the end of the matter.
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