No Automatic Rent Cesser for COVID-19 Closures in Commercial Leases

Commentary on BVK Elektra 2 Liffey Phase 1 ICAV v Elite Gastrobars Ltd & Bunker Estates Ltd (High Court, O’Donnell J., 23 July 2025)

1. Introduction

The High Court decision in BVK Elektra 2 Liffey Phase 1 ICAV v Elite Gastrobars Ltd & Anor addresses, for the first time in an Irish summary-judgment context, whether a tenant may avoid liability for rent arrears incurred during COVID-19 trading restrictions by invoking (a) a landlord’s alleged obligation to obtain business-interruption insurance and (b) a rent-cesser clause triggered when “all means of access” to the premises are “prevented”. The plaintiff (landlord) sought €276,041.44 in unpaid rent, service charges, insurance contributions and licence fees. The defendant resisted summary judgment, asserting that pandemic closures discharged or suspended its obligations.

O’Donnell J. granted summary judgment, holding that:

• the lease’s insurance obligations did not require the landlord to procure cover for pandemic-related trading losses;
• the rent-cesser clause applied only where physical damage or an Insured Risk physically prevented access, not where governmental regulations curtailed trading; and
• the tenant failed to show any bona fide defence justifying transfer to plenary hearing.

2. Summary of the Judgment

1. Summary judgment for the landlord in the sum of €276,041.44 (updated after rent review).
2. Defences grounded on account discrepancies, title to sue, and insurance/cesser clauses all rejected.
3. The second defendant (guarantor) was dissolved; proceedings against it adjourned generally.
4. The Court listed the matter for further orders on costs and interest on 9 October 2025.

3. Analysis

3.1 Precedents Cited and Their Influence

• Harrisrange Ltd v Duncan [2003] 4 I.R. 1 & Aer Rianta cpt v Aer Lingus Ltd [2001] 4 I.R. 607 – set the test for summary judgment: the plaintiff must show an unanswerable claim; the defendant must show a fair probability of a real defence. The Court rigorously applied these thresholds.
• McGrath v O’Driscoll [2007] 1 I.L.R.M. 203 – confirmed that clear contractual issues can be decided summarily. O’Donnell J. relied on this to interpret the rent-cesser clause without plenary trial.
• Oyster Shuckers Ltd v AMS (EU) Ltd [2020] IEHC 527 – Irish authority rejecting reliance on a rent-cesser clause for COVID-19 restrictions. Provided persuasive guidance that pandemic closures are not “damage”.
• Bank of New York Mellon (International) Ltd v Cine-UK Ltd [2022] EWCA Civ 1021 – English Court of Appeal decision similarly refusing cesser based on COVID-19 “access” arguments. Cited as consistent interpretative approach.
• In re Lestown Property Ltd [2021] IEHC 513 – High Court refused to wind up a company over COVID-19 arrears where landlord had “notifiable disease” insurance. Distinguished because (a) different procedural posture (winding-up), (b) insurance cover actually obtained, and (c) discretionary context.
• Statutory authority: s.31 Registration of Title Act 1964 – Folio is conclusive evidence of ownership; underpinned the plaintiff’s standing.

3.2 Court’s Legal Reasoning

3.2.1 Summary-Judgment Framework

The Court reiterated that summary judgment is appropriate unless the defence shows a “fair or reasonable probability” of success. The tenant conceded non-payment; the burden was therefore on it to produce a credible contractual or factual defence.

3.2.2 Accounting “Discrepancies”

The defendant failed to specify any unresolved error after multiple clarifying affidavits. Mere assertion of opacity, without alternative figures, could not defeat judgment.

3.2.3 Title to Sue

Although the lease had passed through several corporate landlords, registration of the freehold in August 2020 vested the reversion in the plaintiff. All arrears claimed accrued after that date. Section 31 of the 1964 Act rendered further proof unnecessary, and the execution of a rent-review memorandum with the plaintiff effectively amounted to tenant acknowledgment of its landlord status.

3.2.4 Insurance Obligations

Lease clauses 1.17 (“Insured Risks”) and 6.2 obliged the landlord to insure against fire, flood, explosion, etc. and associated four-year rent loss. These were physical-damage risks. The open-textured phrase “such other risks as the Landlord may … consider prudent” empowered but did not compel the landlord to purchase pandemic business-interruption cover. Conversely, the tenant’s contribution (cl. 4.2) extended only to the cost of cover actually obtained.

3.2.5 Rent-Cesser Clause (cl. 7.4)

1. Triggers: (a) premises destroyed/damaged or (b) physical access prevented, “in either case by any of the Insured Risks”.
2. Pandemic regulations are not listed Insured Risks and do not entail physical damage or obstruction.
3. The clause suspends rent only until premises/access are “rebuilt or reinstated” – language pointing to physical reconstruction, not regulatory lifting.
4. Hence COVID-19 closures did not activate the cesser.

3.2.6 Precedential Harmonisation

The interpretation aligns with both Oyster Shuckers and Cine-UK. The Court rejected the tenant’s reliance on Lestown as fact-specific and contextually distinct.

3.3 Likely Impact of the Decision

• Commercial Leasing: Confirms that, absent explicit drafting, “all means of access prevented” will be read in conjunction with physical “Insured Risks”. Future leases may see pandemic-specific wording if parties wish to allocate risk differently.
• Litigation Strategy: Tenants challenging pandemic arrears must now surmount a higher hurdle in claiming rent suspension. Summary judgment is unlikely to be deferred where leases mirror the BVK Elektra wording.
• Insurance Market: Landlords are not impliedly obliged to procure business-interruption cover. Negotiated covenants will become crucial; contributions to insurance premia must match the agreed risk profile.
• Drafting Guidance: Clause cross-referencing (e.g., tying cesser to “Insured Risks”) is decisive. Practitioners should scrutinise definitional links and ensure alignment with commercial intent.
• COVID-19 Legacy Litigation: The window for rent-cesser defences based on public-health restrictions narrows significantly in Ireland, bringing domestic jurisprudence in line with English authority.

4. Complex Concepts Simplified

Summary Judgment

A fast-track procedure where the court decides a claim on affidavit evidence without a full trial because the defence is obviously unmeritorious.

Rent-Cesser / Rent Suspension Clause

A provision allowing rent to stop (“cease”) temporarily when the premises are damaged or inaccessible under specified conditions.

Insured Risks

The specific events (e.g., fire, flood) that a lease requires the landlord to insure against; determines when loss of rent cover and cesser clauses activate.

ICAV & QIAIF

An Irish Collective Asset-management Vehicle structured as a Qualifying Investor Alternative Investment Fund—essentially an investment fund permitted to hold real estate and sue in its own name.

Folio & s.31 Registration of Title Act 1964

The Land Registry record of ownership; statutorily conclusive evidence of title.

5. Conclusion

O’Donnell J.’s decision cements a clear principle: commercial tenants cannot rely on standard physical-damage rent-cesser clauses or on a landlord’s insurance covenants to escape liability for rent accrued during COVID-19 shutdowns—unless the lease unmistakably extends to pandemic risks. The ruling harmonises Irish law with recent English authority, offers drafting road-maps for future leases, and signals that the High Court will not hesitate to dispose summarily of defences predicated on broad, but textually unsupported, interpretations of insurance and rent suspension provisions.

In broader perspective, BVK Elektra reaffirms the centrality of precise contractual language and underscores the judiciary’s willingness to resolve pure interpretative issues without plenary trial, thereby promoting commercial certainty in a post-pandemic rental landscape.