Many of you will be aware of the recent judgment against Picturehouse Cinemas Limited, the tenant of the Trocadero.  This is the latest in a line of successful claims by landlords to recover so-called 'COVID arrears' i.e. rental arrears which have built up during the course of the pandemic.

One interesting feature of this case concerned a counter-claim by the tenant, and whether it was entitled to deduct or set-off this amount against the rent arrears claimed by the landlord.  We don't have the details of the counterclaim (which related to alleged overcharging in respect of insurance payments) but Deputy Judge Robin Vos did make a ruling on the tenant's right of set-off.

The wording in the lease stated that the tenant covenanted "to pay the Rents at the respective times and in the manner herein provided for without any deduction whatsoever".  DJ Vos held that these words were not clear enough to exclude the tenant's equitable rights of set-off and therefore ordered that the maximum amount which could be recovered under the counter claim should be deducted from the landlord's judgment for rent arrears.

Modern commercial leases will generally include a standard exclusion of set-off, using wording similar to the provision in the Model Commercial Lease: "The Tenant must not make any legal or equitable deduction, set-off or counterclaim from any payment due under this Lease unless required to do so by law."

What this case illustrates though is that not every commercial lease is drafted clearly enough to thwart a claim for set-off.  No doubt many landlords will be double-checking their precedents and updating the relevant clauses on renewal.