Will courts insert pandemic clauses into 1954 Act lease renewals?

Update from Sarah-Kate Jackson, Partner and Head of Litigation

The issue was considered by DJ Jenkins in the recent first instance decision of Poundland Limited v Toplain Limited (2021) in Brentford County Court.

Poundland Ltd (the tenant) sought to renew the lease of its Twickenham store. This renewal was unopposed by the landlord. The parties, however, could not agree over the insertion of a “pandemic clause”. The clause proposed by the tenant would have reduced the rent and service charge by 50% during any future Government imposed lockdown and prevented the landlord from ending the lease during any period of lockdown. The landlord resisted on the basis there was no market precedent for pandemic clauses to be routinely incorporated into a lease renewal and it would fundamentally change the relationship between the parties. The tenant argued that the insertion of the proposed clauses constituted “reasonable modernisation” and sought to rely on WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbH (2021).

The judge found the landlord’s argument more persuasive and distinguished the two cases on grounds that in the WH Smith case the parties had agreed the insertion of the pandemic clause and it fell to the court to assess merely what constituted an appropriate trigger event for the clause.

The guiding principle in O’May v City of London Real Property Co Ltd 1983 was followed by the judge, who assessed that it would not be fair and reasonable to impose on the landlord a sharing of risk in circumstances over which the landlord would have no control, whilst the tenant may have an element of control, in that there may be government schemes or reliefs available to them.

The case, although not binding, does provide an insight into the court’s thinking on pandemic clauses. Whilst there is scope for these to be negotiated between the parties, they are unlikely to be inserted into a lease renewal if the clause was previously absent.

Should you wish to obtain advice in respect of lease renewal, please contact Sarah-Kate Jackson or Claire MacMahon, our property litigation specialists.