WHSmith wins court case over covid rent reduction trigger

WH Smith Retail Holdings Ltd-v-Commerz Real Investmentgesellshaft MBH (25 March 2021)

By Stuart Hicks, Director.

Winchester County Court has enforced tenant-friendly triggers relating to a pandemic rent suspension clause in the case of WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellshaft MBH.

WH Smith Retail operated premises at the Westfield Shopping Centre in Shepherd’s Bush under a 10-year lease which had fallen due for renewal. Under the Landlord and Tenant Act 1954, the terms of any new lease are first to be agreed between the landlord and tenant but failing this, an application can be made to Court to determine the new terms of the lease. In this case, although the parties had agreed to the inclusion of a ‘pandemic rent suspension clause’ (which would provide for a 50% reduction in the rent), the trigger for the clause was disputed.

The case is interesting because the unit remained open during the lockdown periods. The Landlord proposed that the rent suspension should only be triggered where the Tenant is compulsorily required to cease trading as a result of UK government measures. It noted that the W H Smith operated ‘essential’ services from the premises (a newsagents and Post Office) and so possessed an alleged “competitive advantage” by being allowed to stay open when others were forced to close. That alleged advantage meant that the Post Office which continued trading throughout the pandemic, but overall sales were down by 90%. HH Judge Richard Parkes QC commented:

“It seems to me that the advantages to the tenant of being able to remain open when non-essential shops are closed, in what when I made a site visit in mid-November was a largely empty and echoing Westfield Centre, are more notional than real … the reality is that if the non-essential retailers which surround the tenant at Westfield, and which provide the necessary footfall, are closed, there is no advantage of any substance to the tenant in remaining open”

W H Smith succeeded in its argument that the trigger be based on the shutdown of non-essential retail generally.

For the rating enthusiast it is worth noting that regard was had to Hewitt v Telereal Trillium [2019] 1 WLR 3262.

Similar cases include S Francis v Cavendish Hotels [2021] and Poundland Ltd v Toplain Ltd 7 April 2021.