Real Estate Disputes
Andrew Conway
January 2023
Asked about the possible motivations behind Twitter’s non-payment of rent with reference to a recent article reporting on it, Andrew comments: “Twitter is clearly looking to cut costs, so this must be the primary motivation. The article says that Twitter has abandoned its offices near Piccadilly Circus so, presumably, there’s no intention to re-occupy (or negotiate better terms).
“However, unless the landlord forfeits the lease (that is, taking back the premises, so it can be re-let to other tenants) or agrees to accept a formal surrender of the lease, Twitter will remain liable to pay the rent for the remainder of the term of the lease. Surrender/forfeiture act so as to bring the lease to an end. A tenant will be liable to pay rent (and other sums due under the lease) up the date of surrender/forfeiture but not beyond.”
Commenting on the increase in unpaid rent more broadly, Andrew explains: “during the pandemic, lots of tenants will have withheld payment of rent, primarily for cashflow purposes. The government introduced temporary measures which prevented landlords from forfeiting leases. Those restrictions came to an end on 25 March 2022.
“It also introduced measures which provided for certain rent payable by certain tenants (primarily in the leisure/hospitality sector) over a specified period to be ‘ringfenced’. Landlords and tenants were encouraged to try to agree how much of that rent would be paid (and on what terms). Absent any agreement, the matter could be referred to arbitration. However, those measure have also now come to an end.”
Regarding the potential legal ramifications of Twitter’s non-payment of rent, Andrew states: “non-payment of rent can give rise to forfeiture or Court proceedings for recovery of the arrears (as in this case). However, unless a landlord thinks that it can re-let the premises fairly easily, there would seem little point in forfeiture. A landlord will be left with empty premises on which it will have to pay business rates after three months.
“Moreover, empty premises are more susceptible to occupation by squatters. Many landlords are taking County Court to recover arrears, so that they can obtain a money judgment which they can look to enforce. Ordinarily, a landlord will have 6 years in which to enforce a money judgment.
“A landlord might seek to wind-up a tenant company that fails to pay a judgment debt. I don’t imagine that Elon Musk will allow Twitter to be wound up for failing to pay rent. However, I suspect that the tenant company in this case is a group company and liquidation won’t impact on the main trading company.
“So, save for reputational damage, there may be no risks here.”
Asked about the course of actions courts will be forced to take in these proceedings, Andrew explains: “the Court won’t take action as such. It will be for the landlord to commence proceedings and Twitter may or may not defend the claim.
“If the claim is undefended, the landlord will obtain a default judgment which it can subsequently look to enforce. If the claim is defended, it probably won’t be heard for at least 18 months, unless the landlord makes a successful application for summary judgment on the grounds that Twitter has no real prospect of successfully defending the claim at trial.”
Finally, commenting on what this case means in the broader landscape of property law, Andrew concludes: “it’s virtually impossible to comment on this without knowing the basis of the claim and, more importantly, the grounds on which Twitter defends the claim.
“That said, I can’t think of any basis on which Twitter might successfully defend any claim for payment of rent arrears, so I don’t imagine this case will be ground-breaking. It’s newsworthy simply because of who the tenant is.”
Andrew’s comments were published in The Next Web, 27 January 2023.
