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Insights // 04 November 2021

Court Refuses to Allow COVID-19 Pandemic Clause in Lease Renewal Terms - Poundland Limited v Toplain Limited [2021]

Senior solicitor Sona Vig, in our Commercial Property team, looks at the recent case of Poundland Limited v Toplain Limited [2021].

When dealing with statutory lease renewals under the Landlord & Tenant Act (“1954 Act”), save for the rent and the term of the new lease, the lease will normally be based on the terms of the existing lease, save where any reasonable modernisation is required. Where terms of a renewal lease cannot be agreed between the landlord and tenant, the 1954 Act provides that these will be determined by the Court with regard to the terms of the existing lease and other relevant circumstances. The leading case of O’May v City of London Real Property Co. Ltd discusses the starting point for the exercise of the Court’s discretion to determine the terms of a new lease. In summary, the following tests may apply:

  1. If the transfer of risk is fair and reasonable.
  2. If the objecting party can be adequately compensated.
  3. If the change in the terms jeopardises the tenant’s security and its ability to conduct its business.

The facts

In Poundland v Toplain, the Judge refused to allow a clause suspending rent and service charge by 50% during any future government-imposed lockdown as it was not considered fair and reasonable (applying the principles in O’May) to expect the landlord to share the risk over circumstances in which it had no control and where the tenant could avail itself of reliefs/schemes offered by the government.

The Judge added that the purpose of the 1954 Act was to enable tenants to continue trading from their existing premises when their leases end and, where the balance of risk has been previously negotiated as part of the terms of the existing lease, this could not be reassigned by the Court pursuant to a lease renewal.

Conclusion

The case demonstrates that where COVID clauses are absent in existing leases or are not mutually agreed by the parties, it is unlikely for such clauses to be inserted into a renewal lease, although there may still be scope for inclusion of COVID clauses when parties are negotiating a brand-new lease for the first time.

This case sets out the Court’s approach, although not binding, since this is a decision of the County Court.

Our specialist Commercial Property team can advise in relation to commercial leases and other property-related matters.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800. 

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Sona Vig

Sona Vig

Senior Solicitor, Commercial Property Law

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