Lawrence Stephens

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Westfield Landlord Wins First CRAR Dispute Despite COVID Defence

April 2021

The High Court decision in Commerz Real Investmentgesellschaft v TFS Stores Limited (2021) has ruled in favour of CRI, the owner and commercial landlord of the Westfield Shepherd’s Bush premises, in its action against its tenant, The Fragrance Shop (“TFS”), for rent arrears accrued since the commencement of the first national lockdown in March 2020.

TFS defended the claim on the grounds that CRI had not adhered to the Code of Practice governing relationships between commercial landlords and tenants during the COVID-19 pandemic. TFS argued that by suing them for rent arrears, CRI had effectively tried to bypass the restrictions imposed by the government which were introduced to protect tenants, including the moratorium on landlords’ rights to forfeiture of commercial leases, use of Commercial Rent Arrears Recovery (CRAR), and/or the limitation on insolvency processes such as winding-up proceedings. TFS also argued that covenants in the lease meant that the rent suspension provisions were engaged, and that a ‘keep open clause’ applied, which meant that the rent should have been suspended if the premises were unable to be physically kept open.

On 16 April 2021, the Judge presiding over the case, Chief Master Marsh, held that TFS must pay over £160,000 in unpaid rent and service charges to its landlord.

The Chief Master was satisfied that the correspondence between the landlord and tenant evidenced that CRI had made a considerable effort to avoid escalating proceedings to court, and that the rent suspension provisions and “keep open” clause referred to by TFS could only apply in the event of physical damage to the premises. It was confirmed that CRI had acted lawfully within the government’s temporary CRAR and associated restrictions, which had not placed restrictions on suing for rent arrears.

CRI’s success in this case could encourage other commercial landlords to take proceedings against tenants who have failed to pay up rent and service charges in full. Certainly, commercial tenants should see this case as a warning that COVID cannot always be used as a “get-out-of-rent-free” card.

Image: Westfield shopping centre, Shepherd’s Bush, London. Image courtesy: Harry Lawford via