Summary judgment is a procedure where it is argued before the court that the defendant in the proceedings has no real prospect of defending the claim and there is no compelling reason that the case should go to a trial. Summary judgment therefore avoids the usual time and costs associated with litigation cases running their full course to a trial.
In this case, the tenant had not paid any rent since April 2020 and the landlord applied to the court for summary judgment. The defendant argued:
- the claim was contrary to the Government’s Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic;
- the claim was using a “loophole” in the restrictions placed upon recovery of rent put in place by the Government by circumventing measures preventing forfeiture;
- the landlord was obliged to have insurance to cover the loss of rent as a result of the pandemic and should claim under that policy; and
- the rent cesser provisions in the lease applied to the COVID-19 pandemic and amounted to a suspending event for the purposes of the lease.
The court dismissed all four arguments of the tenant on the basis that:
- the Code of Practice did not affect the legal relationship between landlord and tenant and was not a charter for tenants to decline paying any rent;
- there was no legal restriction on the landlord bringing a claim for unpaid rents and seeking judgment or any restriction on the landlord’s right of access to the court,
- the lease was clear in the risks to be insured and was limited to those and there was no obligation on the landlord to insure against any other risks; and
- rent cesser only applied where there was physical damage to the premises and there was no basis for construing those provisions so that they applied in the event of having to close due a legal requirement.
This case highlights the importance of business owners continuing to pay rent to avoid judgments against them. If it is not possible to pay the full rent when it falls due, business owners should engage with their landlord. Landlords are unlikely to agree to varying the terms of the lease but business owners should try and agree a side letter to their lease to deal with payment of rent during the COVID-19 Pandemic. Most landlords are sympathetic to their tenant’s difficulties and if there is a dialogue over paying rents, agreements may be reached over deferring rent and establishing payment plans to settle arrears.
If you are unable to pay your rent and are unable to come to an arrangement with your landlord, as the above case shows, your landlord will be able to issue a court claim for the unpaid rent as a debt and obtain a judgment using the summary judgment procedure. Any judgment against you will affect credit ratings and can be enforced. Whilst there are some restrictions in place, a judgment can still be enforced by way of a Third Party Debt Order, taking control of goods, applying for charging orders and attachment of earnings. For business owners the risk is the landlord could force your bank to make payments from your bank account or if it has details of any significant contracts you have to force the proceeds of that contract to be paid to them.
If you are in a difficult position regarding payment of your rent, it is always sensible to seek legal advice to see what measures can be put in place to best protect you.
