Lawbite: Re London Bridge Entertainment Partners LLP (in Administration) [2018] EWHC 3200 (Ch)

• United Kingdom

• Real estate litigation

21-02-2019

At the end of last year the High Court was asked to decide the proper meaning of a rent deposit deed relating to a deposit of over £2 million. The deposit allowed the landlord security for, amongst others, "any proper loss which the landlord may incur in or incidental to and consequent upon forfeiture of the lease".

The landlord forfeited the lease of premises in Piccadilly, London, after the tenant had gone into administration. The Property was re-let at a higher rent with 4.5 months’ rent free period being given.

The landlord wanted to use the Rent Deposit sums for periods when it didn’t get any rent in respect of a) the time needed to put the property in a state of repair and condition capable of being re-let, b) time needed to seek a new letting, and, c) any rent-free period granted as an incentive or otherwise to a new tenant. The Administrators claimed it was only those losses incurred during a reasonable period necessary to put the premises back in the state of repair required by the lease which were payable.

The Court accepted that the rent deposit deed was intended to confer rights on the landlord over and above those contained in the lease. It was not however, an unlimited sum payable for an unlimited period of time. The court said the losses the deposit covered had to be in the reasonable contemplation of the parties when they entered into it.

Provisions in the lease suggested that the parties contemplated a rent void of up to 6 months as a result of forfeiture. Therefore the court decided the landlord was entitled to recover the sums which reflected the rent, service charges and insurance lost due to the forfeiture before the premises were re-let subject to a maximum period of 6 months. It was not, however, entitled to its costs of the re-letting or the rent lost during the rent-free period. The court found that these losses could not reasonably have been in the contemplation of both parties to be the result of forfeiture when they entered into the deed.

Key points

Rent deposits are a useful form of security as they mean money is put-down up front. There are, however, limits to what the money put down as a deposit can be used towards if the deposit is called upon.