There has been a second decision in favour of Landlords on the topic of Covid rent arrears in the case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd. Here the Court of Appeal considered whether the tenant is liable for rent arrears during the pandemic. We previously examined the topic of rent arrears surrounding the Commercial Rent (Coronavirus) Act 2022 (the “Act”), however, this particular claim started before the mandatory arbitration scheme.
The Landlord issued proceedings in the High Court against Tenant Picturehouse Cinemas for rental arrears of £2.9m. The Tenant argued it was not liable to pay the rent because the pandemic rendered the premises legally unusable.
The Tenant lost in the High Court in 2021 and subsequently lost in the Court of Appeal.
Court of Appeal decision
The Tenant’s appeal was based on three arguments:
- The lawful use of the premises is a fundamental term of the lease
- There is an implied term that rent should not be payable should the use of the premises be lawfully compromised; and
- Financial damage should fall within the criteria for ‘damaged and not fit for occupation and use’.
Although the Tenant was given permission to appeal, the Court of Appeal restated the High Court ruling and dismissed all three points. The court found that the absence of a provision in the lease to address a specified event – in this case a legally enforced lockdown – meant the rent was due despite the circumstances.
This is one of a few decisions we have seen so far in relation to Covid-related rent arrears. This matter in particular highlights the importance of a well drafted lease to protect tenants or landlords from the risk of unforeseeable events which could occur in the future. For example, many landlords and tenants are negotiating “Covid clauses”.
The Hamlins Real Estate Disputes team has expertise in both commercial and residential matters. We seek to obtain the best outcome possible for every client, no matter how big or small the issue may be. If you would like to find out more about how Hamlins can help you, please get in touch.