The first known arbitration decision following the Commercial Rent (Coronavirus) Act 2022 has been released, under which the tenant failed to obtain relief from rent arrears in respect of its registered office.

Facts

Signet Trading Ltd, the world’s largest specialist jeweller which operates around 300 retail stores and trades as H Samuel and Ernest Jones, sought relief from its rent debt in respect of its four-floor premises at Imperial Place in Hertfordshire.

The premises were used by staff responsible for buying and merchandising, marketing, human resources, retail operations, legal, finance and IT as well as by the board of directors.

However, due to the Coronavirus pandemic, Signet closed all of its retail shops on 23 March 2020. Additionally, the majority of its employees at the office premises were placed on furlough and only 35 members of staff continued to work during the pandemic, with most of them working from home.

Signet claimed that its offices were affected by the Coronavirus closure requirement under the Act which in turn, forced it to shut its retail stores. It therefore sought relief from rent arrears standing at £448,043 which fell due under its lease on 25 March 2020, 25 December 2020 and 25 March 2021.

Arbitrator’s Decision

The arbitrator found in favour of the landlords who successfully argued that the offices were not affected by the closure requirement within the meaning of the Act.

The arbitrator’s reasoning was based on section 4(1) of the Act, whereby a business tenancy is only adversely affected by coronavirus where either of the following were of a description subject to a closure requirement:

  • the whole or part of the business carried on by the tenant at or from the premises comprised in the tenancy; or
  • the whole or part of the premises.

Under the Act, a ‘closure requirement’ is defined as a requirement imposed by coronavirus regulations which is expressed as an obligation to close businesses or premises. However, under regulation 5(1) of the Health Protection (Coronavirus, Business Closure) (England) Regulations 2020, the closure requirement applied to businesses ‘offering goods for sale or for hire in a shop’.

It was decided that the regulation did not extend or apply to the tenant’s premises as it did not comprise or include a shop but was rather used as office space. Despite the offices being used to support the tenant’s retail business, the arbitrator found that the regulation was not intended to extend to such a situation. Rather, the requirement of regulation 5(1) was that the person responsible for carrying on business offering goods for sale in a shop must cease to carry on that business. As such, the tenant’s premises was not affected by the closure requirement within the meaning of the Act and relief from the rents owed was denied.

If you wish to discuss any of the issues arising, please do not hesitate to get in touch with a member of the Teacher Stern Property Litigation team.

For more information on the Commercial Rent (Coronavirus) Act 2022 and the arbitration process, please see our article ‘Commercial Rent Arrears Arbitration Scheme – The clock is running’.