The world’s largest specialist jeweller has failed to obtain relief from rent arrears of £450,000 in respect of its registered office, in the first known arbitration award under the Commercial Rent (Coronavirus) Act 2022.
The decision will come as a blow to other retail chains that might have hoped to rely on the arbitration scheme to avoid paying rent on headquarters and other office premises.
Signet Trading Ltd, which operates around 300 retail stores under the H Samuel and Ernest Jones brands, had sought relief from the rent debt in respect of its four-floor premises at Imperial Place, Elstree Way, Borehamwood, Hertfordshire.
However, in an award published by Falcon Chambers Arbitration, Gary Cowen QC found in favour of landlords Fprop Offices (Nominee) 4 Ltd and Fprop Offices (Nominee) 5 Ltd.
Signet had claimed that its offices were affected by the Covid-19 closure requirement that forced it to shut its retail stores.
The premises were used by the board of directors as well as staff responsible for buying and merchandising, marketing, digital, human resources, retail operations, legal, finance and IT, with 174 employees based there before March 2020.
On 23 March 2020, as a result of the Covid-19 pandemic, the chain closed all of its retail shops. In addition, staff working at the office premises were instructed to work from home. The majority of employees based there were placed on furlough and only 35 members of staff continued to work during the pandemic, almost all of them working from home.
It sought relief from rent that fell due under its lease for the quarters commencing on 25 March 2020, 25 December 2020 and 25 March 2021, with total arrears standing at £448,043.
However, the landlords successfully argued that the offices were not affected by a closure requirement within the meaning of the 2022 Act.
The arbitrator said: “The business carried on by the tenant specifically at the premises with which this reference is concerned was not subject to a closure requirement. Accordingly, it was not adversely affected by coronavirus for the purposes of section 4 of the 2022 Act. It follows that there is no protected rent debt in this case.”
Explaining his reasoning, he said that section 4(1) of the 2022 Act provides that a business tenancy is “only adversely affected by coronavirus where the whole or part of the business carried on by the tenant at or from the premises comprised in the tenancy or the whole or part of the premises was of a description subject to a closure requirement”.
Under regulation 5(1) of the Health Protection (Coronavirus, Business Closure) (England) Regulations 2020, such a closure requirement applied to businesses “offering goods for sale or for hire in a shop”.
Finding that was not the case here, he said: “It is plain that the applicant is not offering goods for sale in a shop from these premises. The premises do not comprise or include a shop. The applicant’s case is that the business actually being carried on at the premises was, in essence, an ancillary part of the same business, with the office use merely supporting the applicant’s retail business.
“That may well be the case but, in my judgment, the wording of regulation 5(1) was not intended to and does not extend to such a situation. The requirement of regulation 5(1)(a) was that the person responsible for carrying on business offering goods for sale in a shop must cease to carry on that business.”
To send feedback, e-mail jess.harrold@eg.co.uk or tweet @EGPropertyNews