Frasers is latest retailer told to pay rent arrears
The financial cost of Covid could jump for many non-essential retailers, given a second High Court ruling over rent arrears. Frasers, the lifestyle retail group, has been ordered to pay rents accrued since the beginning of the Covid-19 pandemic.
The Sports Direct owner has been defeated in its battle with landlords over arrears during enforced store closures after a High Court ruling.
Master John Dagnall awarded landlords AEW UK Reit and Bank of New York Mellon (International) summary judgement in their claims for an undisclosed amount of unpaid rent relating to a Sports Direct store in Blackpool.
He said that the voluntary code of practice for commercial property relationships during the pandemic was no obstacle to bringing a claim for unpaid rent.
“I do not see that the existence of a voluntary code encouraging negotiation should in any way obstruct a claimant who contends that they have a clear case seeking summary judgment.
“Assuming that such a clear case is made out, from obtaining it at this point, I regard the code both as being outside the litigation process and not applicable to these tenants who are not said to be unable to pay,” Dagnall said.
He added: “The situation of Covid and the Covid Regulations has (at least in modern times and as a matter of degree) been unprecedented and, in particular, with regard to its effect upon the entertainment (and hospitality) sector but also the non-essential retail sector which has been deprived of the turnover which is the lifeblood of their businesses (and especially where there is no online equivalent). It is impossible not to feel sympathy for them.”
Frasers has yet to comment on the ruling.
The decision follows a similar ruling in favour of the owners of Westfield London against The Fragrance Shop, where the High Court gave judgment on the first case where a “Covid defence” has been raised for non-payment of rent.
Westfield London’s owners won a ruling that The Fragrance Shop must pay more than £160,000 in unpaid rent and service charges accrued during the pandemic.
Together, these rulings will become a major obstacle for other retailers wanting to avoid paying rents for the long periods their stores have remained closed over several lockdowns. They may be a deciding factor on whether businesses will be able to survive.
By comparison, the results will come as a great relief for many landlords, many of whom have only received a fraction of the rents due over the last Covid year.
There has been criticism of large retailers that could afford to pay their rent when they've not done so. However, it's hard not to feel sympathy for them given that they've been expected to pay rent on stores that were closed for long periods of time, operating under unprecedented restrictions, or seeing low levels of footfall that were unthinkable when their rents were initially set.
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