Westfield wins case against Fragrance Shop over unpaid rent
In a worrying development for retailers — but the opposite for their landlords — the High Court in the UK has backed the joint venture partner of Unibail-Rodamco-Westfield against The Fragrance Shop (TFS) in a dispute over unpaid rent.
TFS owed Westfield more than £160,000 in rent and service charges for its Westfield London store that has been forced to close for long periods several times during the various lockdowns of the past year.
The case was being closely watched as it was the first High Court ruling on a non-payment issue where Covid-19 was being used as an excuse.
TFS originally agreed to a five-year lease at an initial rent of £200,000 a year back in 2019. This was then adjusted to around £180,000 base rent a year, plus rent linked to turnover.
The store had been closed for more than seven months since late March last year and TFS stopped paying rent in April 2020. It also owes the April-June 2020 service charge.
The payment of £166,884 plus interest was sought by Westfield’s JV partner Commerz Real Investmentgesellschaft.
URW’s UK chief operating officer Scott Parsons said the company has put a number of support measure is place for its tenants, including a switch to monthly payments, deferred rents and lower service charges. But he added that “rent collection remains an issue and the government moratorium is not helping as it encourages ‘can pay, won’t pay’ behaviour. Our strategy is to work with those who engage with us to reach a fair and positive outcome for all and for those who refuse to engage, we have been forced to take stronger action".
TFS had argued that its landlord wasn’t sticking to the code of practice for commercial property relationships that had been issued during the pandemic.
But the High Court disagreed and the summary judgement will clearly be a wake-up call for many retailers, particularly bigger names that have been heavily criticised by landlords for withholding rent when they could have afforded to pay it.
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