Can I reduce my rent arrears?

The recent judgment against Picturehouse Cinemas Limited (the tenant of Trocadero) was a successful claim by a landlord to recover those infamous ‘COVID arrears’ (arrears which have accumulated during the life of the pandemic).

Interestingly, the case unveiled a potential way for a tenant to reduce their arrears. This case involved a counter-claim by the tenant (relating to overcharging insurance payments) and the tenant queried whether or not they were able to set-off this amount against the arrears demanded by the landlord.

The lease expressly mentioned that the tenant covenanted ‘to pay the Rents at the respective times and in the manner herein provided for without any deduction whatsoever’. Deputy Judge Robin Vos claimed that these words were by no means clear, and most definitely did not exclude the tenant’s rights of set-off.

He consequently ordered that the maximum amount under the counter-claim should be subtracted from the landlord’s judgment for rent arrears.

It should be noted that usually, modern commercial leases will include an exclusion of set-off, which tends to be based on the provision in the Modern Commercial Lease: ‘The Tenant must not make any legal or equitable deduction, set-off or counterclaim from any payment due under this Lease unless required to do so by law.’

This case is a classic example of how not every lease is drafted well enough to distinguish claims for set-off. If you are a landlord you should check your lease precedents and alter the necessary clauses upon renewal or issue of a new lease.

If you need any advice contact our Commercial Property team.