Covid-19 and the Government’s response to it is posing a number of questions as regards the enforceability of lease provisions and contracts. This note provides a brief overview summary of a few of the issues arising.

User provisions

In the interim period between requested and enforced lockdown some Cafes, Bars and Restaurants sought to undertake a takeaway service in order to maintain some business. Such action will potentially also arise if restrictions are lifted on a piecemeal basis. The change to the business may amount to a breach of the user provision and landlords will have to decide whether to take action in such circumstances. Where it is clearly an interim solution a landlord may turn a blind eye or agree to a variation to the lease to allow it in the specific circumstances. Where the breach is long term or a landlord is not agreeable to it, then a landlord can seek remedies for the breach through effecting forfeiture or seeking an injunction and damages.

‘Keep-open’ clause?

Some commercial leases, usually in large retail developments, will contain a ‘keep-open’ covenant requiring the tenant not to close the business down.

A closure resulting from the Government ‘lockdown’ in relation to Covid-19 is unlikely to be a breach of the keep open covenant and a tenant will be able to rely on its obligation within the tenant covenants in a lease to comply with legislation as a defence to any such claim.

Will Covid-19 frustrate my lease?

It is very unlikely that Covid-19 will frustrate a lease. Last year the High Court ruled that Brexit would not frustrate a commercial lease (Canary Wharf (BP4) T1 Limited & Others v. European Medicines Agency [2019] EWHC 921), the court laying great emphasis on the fact that the lease contained alienation provisions that would assist the tenant in any event.

On the same reasoning and given that the vast majority of leases contain alienation provisions, it is unlikely that Covid-19 will amount to a frustration of a lease.

Where frustration of a lease may arise is where the period of closure (albeit temporary) is for a substantial period of the lease term (i.e. a short term tenancy / pop up shop) and therefore as a result of the closure a tenant has not been able to utilise the premises demised for a significant period especially where the remainder of the term (once the premises reopens) is limited.

Will Covid-19 engage a force majeure clause allowing for the termination of my lease?

A force majeure clause cannot be implied into a lease. Where there is such a clause within a lease successful reliance on it will depend on the drafting of the clause. Where there is no reference to disease, an epidemic or similar then reliance on the clause will fall to a more general catch all provision which would be subject to interpretation. Again, it is unlikely that Covid-19 will fall into the force majeure category, as it is unlikely to be viewed as a foreseeable event unless expressly stated. Where it can be relied upon there are generally specific notice provisions which must be strictly adhered to.

Can a landlord close premises or restrict access to their buildings?

If instances of the infection have been found in a landlord’s building, they may want to restrict access to the whole or part of the building to try to prevent its spread. Unfortunately, a landlord is unlikely to have the right to do this: all leases will either have an express or implied covenant given by the landlord guaranteeing the tenant’s quiet enjoyment of the property, and if the landlord tries to restrict access they are likely to be in breach of this covenant.

There may be provisions in the lease which allow the landlord to periodically review the regulations that govern the use of the building (particularly common parts) which could be used to put in place limited restrictions, but the extent of any such ability will be dependent on the wording of the lease. Regard will also need to be had as to whether the use of the building is for key workers or work is being undertaken within the building which cannot be undertaken from home before a restriction or closure of premises is undertaken.

Please let us know if we can help you review your lease if you have any such concerns.

Ongoing litigation

For the time being, the courts remain open and ongoing litigation is proceeding as normal, so please do keep an eye on any litigation you are currently undertaking. The courts seem to be looking at whether video and phone hearings can be used to minimise the spread of Covid-19 while allowing the business of the courts to carry on with minimal interruption.

Keep an eye on your post!

Many businesses have put arrangements in place to close their offices and allow their staff to work from home. Please remember, however, that your registered office remains your registered office even if there is no one there! This means that any notices sent to your registered office will still be deemed served in the usual way, so please make arrangements to ensure that your post is checked periodically.

Land Law

We hope that the above pointers are helpful and perhaps answer some of your current questions.  Please do not hesitate to contact us if we can be of any assistance to you in these unusual times.