The government’s response to the coronavirus pandemic includes a series of measures that prevent landlords from using CRAR, from forfeiting leases, or from presenting winding up petitions against their tenants. But it has not prevented landlords from seeking money judgments from the courts.
The courts have dealt with two such cases recently – and it is interesting to contrast the different outcomes in Commerz Real Investmentgesellschaft mbH v TFS Stores Ltd [2021] EWHC 863 (Ch), in which the landlord of the Westfield Shopping Centre obtained summary judgment for arrears of rent due from one of its tenants, and Riverside CREM 3 Ltd v Virgin Active Health Clubs Ltd [2021] EWHC 746 (Ch), which concerned a claim for arrears of rent in respect of premises in Canary Wharf, amounting to £928,727.04 plus costs and interest.
The landlord’s claim was served on 22 January 2021 and it applied for summary judgment on 19 February 2021. The tenant requested an adjournment on 25 February 2021 and, following the refusal of its request, applied for a stay on 5 March 2021 – for seven weeks, until 30 April 2021.
There was no dispute about the tenant’s liability for the arrears – and the stay would stop the landlord from taking steps to pursue a claim to which there was no defence. But the tenant explained that it was pursuing a restructuring plan under Part 26A of the Companies Act 2006 because it was facing a cash flow crisis as a result of the coronavirus pandemic and was on the verge of running out of money altogether.
It was clear by virtue of arrangements that had already been made that more than 75% of the secured creditors would vote in favour of the restructuring. Consequently, there was a reasonable prospect that the court would sanction the restructuring. The tenant explained that, if the plan was not implemented, it would have to file for administration and the creditors would recover less than under the restructuring proposals.
The restructuring plan divided the landlords into different classes. The landlord was in class B; the arrears of rent that had accrued would be written off entirely and replaced with a sum equivalent to 120% of the sum that the landlord would receive if the company were to go into administration. However, rent going forward would be paid in full, on a monthly basis. If, on the other hand, the landlord’s application for summary judgment were to be successful, and if it were to be able to enforce that judgment, it would receive substantially more than other landlords in class B.
The judge noted that the claim was issued before the discussions about restructuring. But the restructuring proposals were not aspirational. Court dates were booked and, if the judge were to refuse a stay, it was likely that the sum due to the landlord would have to removed from the pot of money that was available to creditors. Therefore, after weighing the interests of the landlord and the wider class of creditors, the judge decided that the interests of the creditors trumped the private interests of the landlord and that it was right to stay the claim, subject to a recital that the landlord was entitled to judgment – so that it would not need to return to court for a contested hearing if the restructuring were to fail.
Allyson Colby, property law consultant