The tenant (Poundland Limited) and landlord (Toplain Limited) ended up in court in connection with the negotiation of terms in business tenancy renewal under the Landlord and Tenant Act 1954. One of the terms under discussion was the inclusion of a rent reduction ‘pandemic clause'. The tenant proposed reducing the rent and service charge by 50% during any future government imposed lockdown. The landlord resisted on the grounds that there was no market precedent for clauses of this nature being routinely included.
It was argued by the landlord that the tenant, if forced to close due to a mandatory government lockdown would receive grants and assistance from the government, however the landlord would be left with no avenue to mitigate its losses. The judge found favour with this argument following the guidance in O'May v City of London Real Property Co Ltd [1983] 2 AC 726, finding that it would not be fair and reasonable “to impose on the landlord a sharing of the risk in circumstances over which the [landlord] would have no control whilst the [tenant] may have some by reference to reliefs or schemes that might be available to them by the government”.
Another recent case which considered ‘pandemic clauses' was WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellshaft MBH (2021). Crucially this had alternative facts in that the tenant and landlord had agreed on the inclusion of a pandemic clause, but needed the court's help in assessing what would constitute a sufficient ‘trigger event' for the clause.
These two cases demonstrate that there is scope for the inclusion of ‘pandemic clauses' when the parties are negotiating a brand new lease for the first time, but such a clause is unlikely to be inserted into a renewal lease, where such a clause was previously absent.
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