No! It was not ok. If you’re currently studying land law or hoping to build a career based on it you might be interested in the recent decision in Bank of New York Mellon v Cine-UK. The case is also relevant to discussions on the law of frustration and would be a good one to cite if you’re doing an essay on that.
In this recent case four tenants contested the application by a landlord for summary judgment on claims arising from the tenants failure to pay their rents while their premises were closed to the public as a result of the pandemic. The tenants raised a number of arguments and lost on all counts, the most interesting of their contentions were as follows:
- The suggestion that clauses in the leases relating to the cessation of paying rent in the event of “damage or destruction” should be construed widely to include inability to trade as a result of Covid.
- The fact that the landlord had taken out insurance against loss of rent, which covered the precise circumstances which existed, entitled the tenants not to pay. The landlord could rely on that insurance.
- The Covid lockdown was a frustrating event.
The court gave these arguments reasonably short shrift and it’s not that difficult to see why.
The court held that the pandemic was not an unforeseeable event. Just as the landlord had insured against it, so too could the tenants have done. The tenants could not expect effectively to take the benefit of the landlord’s insurance.
The rent cesser clauses did not cover a pandemic, they related to damage to the premises. A term cannot be implied just because it was reasonable to do so. It must be necessary to imply it. That was not the case here.
The doctrine of frustration did not apply here. The circumstances were effectively the same as in National Carriers v Panalpina (Northern) Ltd. In that case a tenant had taken a 10-year lease of a warehouse. The local authority closed the only road to the warehouse for 20 months. The tenant claimed the lease had been frustrated, as they could not use the warehouse during this time. The claim failed as the loss of 20 months out of a 10-year lease term was not sufficient to fall within the doctrine of frustration. The judge in the current case concluded that the outer limit of any period of lockdown would be 18 months and noted that all leases would still have more than a y ear left to run at that point and that all were protected under Landlord and Tenant Act 1954.
The judgment concluded with Master Dagnall requoting and approving words put to him in argument:
“In times of uncertainty the law must provide a solid practical and predictable foundation for the resolution of disputes and the confidence necessary for an eventual recovery… Contractual rights are to be evaluated by applying settled principles to the contract in question. Legal certainty remains paramount and gives the surest basis for resolution.”
You could certainly have an essay on that quotation!