Covid 19 and commercial tenants-are they allowed to cease paying rent?

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Are you a small business owner with a leased premises? Have you had difficulties paying rent as a result of Covid 19? Are you entitled to stop, even temporarily, paying rent?

The High Court addressed this question recently in a case involving the Klaw restaurant in Temple Bar.

The landlord had demanded vacant possession of the premises on the grounds of non-payment of rent during the Covid 19 pandemic, the fact that the lease had expired and the Klaw restaurant was overholding. The Klaw restaurant had obtained an interim injunction preventing the repossession.

At the full hearing of the substantive action the Klaw had claimed to be entitled to stay in the premises on the basis that the lease they relied on had not expired. Nevertheless, the Klaw had ceased paying rent during the pandemic.

The High Court clarified the issues it will look at when deciding an application for an injunction where the tenant is in breach of its obligation to pay rent.

Firstly, is there a fair issue to be tried. In this case the High Court held there was.

Secondly, are damages an adequate remedy? The landlord argued that the High Court could not grant an injunction to the Klaw when it had ceased paying rent.

The High Court referred to previous case law where there is a general unwillingness on the part of the court to grant an injunction where the tenant has ceased paying rent. The court went on to point out that this is not a rule that is cast in stone but it is a “major factor” weighing against its decision to grant one.

The Klaw had not put forward any proposals to address arrears of rent and was unable to firm up its undertaking as to damages.

Even though the courts are sympathetic to tenants and their difficulties arising from Covid 19 the court will not grant an injunction to a defaulting tenant where it would effectively be a subsidy to the future trading prospects of the tenant and would deprive the landlord of possession of the premises.

Read the full decision in OYSTERS SHUCKERS LIMITED T/A KLAW AND ARCHITECTURE MANUFACTURE SUPPORT (EU) LIMITED AND WOOI HEONG TAN [2020] IEHC 527

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