Signet Trading Limited v Fprop Offices (Nominee) 4 Limited and Fprop Offices (Nominee) 5 Limited.
Gary Cowen QC, at Falcon Chambers Arbitration
5th July 2022
Final Award based on the preliminary issue of whether there is a “protected rent debt” under Section 3 of the Commercial Rent (Coronavirus) Act 2022
BACKGROUND
The Commercial Rent (Coronavirus) Act 2022 (“Act”) offers relief from payment of “protected rent debts” due from a tenant, under a business tenancy.
As per Section 3 of the Act, “a protected rent debt” is a debt under a business tenancy consisting of unpaid protected rent, where the tenancy is adversely affected by coronavirus, and the rent is due for a period of occupation by the tenant, which falls within the statutorily protected time period.
Section 4 of the Act stipulates that a business tenancy is adversely affected by coronavirus where the whole or part of the business carried on by the tenant at the premises was subject to a closure requirement.
In lieu of various Regulations passed by the government, a Schedule of listed businesses was laid out, denoting the businesses which would be subject to the closure requirement under the Act.
FACTS
The Claimant is in the business of sale of jewellery and watches through 300 retail stores across the UK. The dispute surrounds the registered office of the Claimant located at Hertfordshire (“Premises”). The Respondents are the Claimant’s landlords of these premises. The rent which accrued to the Respondents from March 2020 to July 2021 amounted to £448,043.04.
It is undisputed that the tenancy to which the disputes relate is a business tenancy within the meaning of Section 2 of the Act. However, the premises did not comprise of a retail shop, but were office premises, occupied by the Claimant’s staff, who largely worked from home from 23rd March 2020 onwards.
It is the Claimant’s contention that its offices in the premises were subject to “closure requirement” as per the Schedule which brings it under the purview of Section 4(1) of the Act, even though the Schedule did not apply to retail shops selling jewellery or office premises. The Claimant contends that whilst the offices are not premises of a specified description required to be closed, their business involved sale of goods, which was of the specified description which was required to be closed. Therefore, their argument was that a business can still be adversely affected where the business being closed does not operate from the premises.
The Respondent’s contention was that the Regulations apply only to the Claimant’s retail shops and does not apply to the office premises which were not required to close.
DECISION
The arbitrator, on a reading of Section 4(5) of the Act, opined that where the premises are occupied for the purpose of a business, which is also carried on elsewhere, the Act applies only with “so much of the business” as was carried on at or from the premises. It was therefore determined that since the Claimant is not offering goods for sale in a shop located on the premises, the Regulations did not impose any closure requirement on the offices of the Claimant.
The decision of the Arbitral Tribunal was that the business carried on by the Claimant specifically at the premises, not being subject to the closure requirement, was not adversely affected by the coronavirus for the purposes of Section 4 of the Act and therefore, the rent arrears could not be protected or written off. Hence there was no protected rent debt. Therefore, the Claimant’s reference was dismissed.
FUTURE CLAIMS
The decision is significant as it provides clarity on the application of the scheme in practice. If the Claimant was successful in its argument, it could have potentially led to claims from tenants of offices, looking to avoid rental arrears by seeking protection under the Act. The decision will therefore be well-received by landlords who have let their properties to businesses to be used as an office.
As arbitral awards under the scheme of the Act are final and binding, there is limited scope for further appeal. Additionally, the deadline to refer a dispute to arbitration under the Act is 23rd September 2022 and therefore, a party interested in bringing a claim under the Act would be prudent to act quickly.
How KTS Legal can help
If you are a landlord wishing to bring an arbitral claim under the Act or a Tenant facing such claims, our specialist commercial litigation team can provide expert advice and assistance in dealing with such complex claims. We provide services for both Commercial Landlords & Leaseholders in England and Wales.
We can be reached by email at info@ktslegal.com and by telephone at +44 (0) 208 367 0505.
