London Trocadero (2015) LLP v Shinners & Myers (As Joint Administrators of London Bridge Entertainment Partners LLP) [2018] EWHC 3200 (Ch) concerned a rent deposit in the sum of £2,056,250 relating to a building at Piccadilly Circus. The tenant company had gone into administration and the landlord had forfeited the lease with the consent of the administrators. The landlord had subsequently re-let the premises, but sought to withdraw a sum from the rent deposit to offset its losses.
The rent deposit deed charged the sum deposited with the landlord as security for “(a) ‘the payment and discharge of any of the tenant’s obligations from time to time existing” and “(b) for any proper loss which the landlord may incur in or incidental to and consequent upon forfeiture of the lease”. What exactly did this last limb of the clause mean?
The landlord claimed that it was entitled to recover rent, service charges and insurance for the time reasonably required to put the premises into a state that would enable them to be re-let, and for a further period whilst marketing and re-letting. The tenant’s administrators claimed that the landlord was entitled to recover only for the period that it would reasonably take to put the premises back into the state of repair required by the covenants in the lease. The administrators argued that the landlord’s formula was not a standard of repair that the law recognised and was not supported by the wording of the rent deposit deed, or the lease.
Who was right? The court preferred the administrators’ formula. However, the rent deposit deed imposed obligations on the tenant and conferred rights on the landlord beyond those set out in the lease. And the challenge lay in determining their scope.
In the court’s view, the phrase “proper loss… incidental to and consequent upon forfeiture of the lease” encompassed loss of a type and extent that, at the time when the document was signed, could reasonably be supposed to have been in the contemplation of the parties as being the probable result of forfeiture. And the lease (which could be used as an aid to construction because it was executed contemporaneously with the rent deposit agreement) contained provisions that suggested that the parties had contemplated a rent void of up to six months as the probable result of forfeiture.
The court pointed to a clause in the lease permitting the landlord to market the property and to conduct viewings in the six-month period before the lease ended. And, had a guarantor been provided, under the terms of the lease, the guarantor would, on forfeiture, have been obliged either to take a lease for a term equivalent to the unexpired residue of the term or to pay the landlord a sum equivalent to all sums payable under the lease for a period of six months.
Therefore, the landlord should be allowed to recover a sum that reflected the rent, service charges and insurance lost before the premises were re-let, subject to a maximum period of six months running from the date of forfeiture. But the judge rejected the landlord’s claim for the recovery of the costs of re-letting and for the rent that the landlord had had to forgo during the rent-free period enjoyed by the new tenant.
Allyson Colby, property law consultant
