Can commercial tenants suffering the effects of the pandemic on their business unilaterally stop paying rent?
In a recently reported decision of the
Madam
It is noted that
The court opted to preserve the status quo both in allowing the continued operation of the tenant and securing the unpaid amounts in full. Unless the tenant's arguments succeed, this will mean that the landlord is paid in full. In practice, the judge fashioned a practical response to an urgent situation, and sent the parties back to the negotiating table or to a further hearing.
In doing so, the court has shown a willingness to weigh in on commercial matters and decide the terms on which sophisticated parties must do business during the pandemic. It may be significant that the judge hearing the matter is very experienced in receivership and foreclosure matters, which involve the court actively managing ongoing commercial enterprises. It remains to be seen whether other courts will take this active approach in similar cases.
For commercial real estate practitioners, the key takeaways are:
(1) broad clauses relating to delay and frustration should be reviewed carefully;
(2) the courts are willing to intervene in the relationships of even sophisticated commercial parties;
(3) the courts have not, as yet, accepted the argument that a landlord must take specific pandemic-related measures in order to meet the standard of a first class shopping centre.
We will continue to monitor this ongoing case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
Suite
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