News

Archive for January, 2009

Keeping those stores open!

Times are hard.  The British Retail Consortium has announced that UK retail sales values fell 3.3% on a like-for-like basis compared to a year ago and many retailers are struggling.  In order to assist cash flow, traders have asked landlords to accept monthly and not quarterly payments of rent in advance.  The market also knows that some retailers are taking longer to meet their debts - thereby putting pressure on small suppliers.

The Sunday Times reports that one landlord, Prupim (the property owning arm of the Prudential), is in talks with tenants of its retail parks and shopping centres about lower service charges or offering assistance over rental payments.  No doubt some other landlords will be unwilling or financially unable to assist and will be looking to enforce the tenants’ leasehold covenants.

These circumstances give rise to the spectre of the keep open covenant which haunted landlord and tenant practitioners years ago.  The House of Lords refused to grant a mandatory injunction requiring the retail tenant to carry on trading in England and Wales (see the 1997 decision in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd)).  The reasoning related to the difficulty of supervision.  Instead, the Courts will award damages if the landlord can show it is suffering a loss because of the tenant’s refusal or inability to trade.  The law differed in Scotland but in the 2007 Court of Session case of Douglas Shelf Seven Ltd v Co-operative Wholesale Society Ltd the landlord of a Dundee store sought damages rather than an order to enforce the covenant.  The threat of an award of damages may be detrimental to rental at review.  So why do landlords seek to impose the covenant upon their retail tenants?

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