What do you do if the commercial tenant’s owner just happens to be the richest man on earth, and apparently saves money by just refusing to pay his bills? Let me explain, writes Charlie Davidson, our own Hound of Holborn, and a Solicitor in our Property team.
The tenant in question is of course Twitter and its owner, Elon Musk. As was recently described in the national media Musk made half of its 7,000 global workforces instantly redundant and closed offices almost immediately after taking control of the company.
What he apparently overlooked was that he also instantly breached his employer’s covenants and his obligations as a landlord. Pretending, just because you don’t want it that you can renege on a commercial tenancy agreement is just crass. Perhaps Musk will enter into a company voluntary arrangement (CVA) which is an insolvency procedure that allows a company with debt problems or that is insolvent to reach a voluntary agreement with its business creditors regarding repayment of all, or part of its corporate debts over an agreed period of time?
But Twitter isn’t in administration. And Elon Musk isn’t bankrupt (yet anyway), so it will be interesting to hear what his defence is now he is being sued by landlords in San Francisco, Singapore and London after failing to pay rent on its offices.
His UK landlord couldn’t be more blue blood, being the Crown Estate. The Crown Estate, which manages the public estate of His Majesty King Charles III, has filed a claim against Twitter in the High Court in last month. The alleged rental arrears relate to office space near Piccadilly Circus in central London, according to the BBC. The Estate is one of the largest landowners in the UK, and although the portfolio belongs to them British monarch, it is not private property. It’s revenue from the Estate goes to the Treasury for public spending.
Musk will have a fight on his hands if he seeks to flat out deny the Crown what may be legally owed.
The owner of Twitter’s San Francisco headquarters has also sued Twitter after it failed to make its latest monthly rent payment for January, amounting to $3.4M, according to documents filed on Friday with the superior court of California, and reported in the Guardian and Associated Press.
If you are facing commercial difficulties Bishop & Sewell’s advice is be proactive and come to arrangements with your creditors. Our restructuring team (property, commercial, litigation etc) is well placed to advise and act for firm and business that find themselves is lean times.
Contact our Property Team
If you are thinking of buying a property, or have questions about rents or commercial leases please quote Ref CB379, and call 020 7631 4141 and ask for a member of the Property team or email firstname.lastname@example.org.
The above is accurate as at 01 February 2023. The information above may be subject to change during these ever-changing times. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.