After the lifting of all COVID restrictions in July 2021, and the successful roll-out of the vaccination programme across the United Kingdom, one would be forgiven for predicting an end to Government-enforced lockdowns and with it, an end (or at least reduction) in ‘Pandemic Relief Clauses’ being present in leases.
However, as we approach Winter 2021, the likelihood of further restrictions grows. With this comes more market uncertainty and increased demand on the part of prospective occupiers to negotiate Pandemic Relief Clauses which aim to reduce lease liabilities in the event of more COVID restrictions. This desire is understandable given that all recent case law in this area sits firmly in the camp of the landlords.
The Government’s temporary stay of execution on forfeiture and on a landlord’s ability to recover rent by seizing a tenant’s goods under the statutory Commercial Rent Arrears Recovery Procedure (CRAR) is exactly that – temporary – and the recent case law, involving tenants such as Sports Direct and the Fragrance Shop, all firmly held that all rent arrears under leases during periods of lockdown remain due in full. Further, whilst the Government’s Code of Practice (released in June 2020), which sought to govern the responsibilities of landlord and tenants during the pandemic, was welcome at the time of its introduction, the courts have stated unequivocally that guidance is not law.
The Courts have also recently rejected the claims of Cineworld and Picturehouse Cinemas, who sought to claim, amongst other arguments, that there should be an implied term in their lease that rent should not be payable during any period where use of the premises was illegal and/or where customer attendance at the premises would not be at the level anticipated (as a result of restrictions on the numbers of people allowed in). As a result, the two cinema chain’s unpaid rent and service charge, to the tune of around £3m, was held to be due in full.
In light of all this, and noting too that landlords have also had it tough during the Pandemic - with the stays on business rates, furlough payments and government grants not being applicable to them - there can be little doubt that the Government and the courts are keen to resume normal service. As a result, a prospective new tenant would be well-advised to negotiate Pandemic Relief Clauses to limit exposure in the unfortunate event of another lockdown and/or the introduction of more social distancing measures which restrict the use of premises.
In addition to the usual rent suspensions (or at least concessions) during lockdowns, prospective tenants should also, for example, think about suspensions (or concessions) to service charge; a relaxation of insurance, repair and decoration obligations; a suspension of any keep-open obligations; waivers of certain break or yield up conditions and extensions to time periods for the carrying out of works. Where Pandemic Relief Clauses are agreed, professional advice is essential as precise drafting to define what exactly constitutes “Lockdown” and "Social Distancing Measures” could save thousands!