Could not open due to Covid

We referred in our December 2021 newsletter to, inter alia, the covid related case of London Trocadero (2015) LLP v Picturehouse Cinemas Ltd [2021] EWHC 3103. Cinemas in the London Trocadero claimed to be unable to operate during the pandemic lockdown and failed to attract sufficient customers to meet outgoings once they re-opened due to covid restrictions. In consequence, the cinema operators failed to pay rents amounting to £2.9m claiming there was an implied term in their leases that rental was only payable if and when the cinemas could be operated and/or there had been a total lack of consideration during the periods when the cinemas were forced to close. The case reflects others in which similar arguments had been used to support the tenants’ claims.

The Court of Appeal heard and gave judgement in the case on 27th July together with the case of Bank of New York Mellon (International) Limited v Cine-UK Limited [2021] EWHC 1013 (QB) in which similar arguments arose. In both first instance cases, the judges upheld the landlords’ claim for the unpaid rent but gave leave for the tenants to appeal to the Court of Appeal.

Giving judgement in the higher court, Sir Julian Flaux KC said “In both appeals, the tenants resist the payment of rent for periods when operation of the cinemas was unlawful on two gounds: (1) that the Government restrictions imposed as a consequence of the pandemic caused a failure of basis, relieving them of the obligation to pay rent for those periods and (2) that it was an implied term of the lease that the tenant should be relieved of its obligation to pay rent where the tenant could not lawfully use the premises as a cinema.”

Sir Julian considered the full wording of the leases but in no case could find cause for implied terms to be included thus relieving the tenants of their obligations to pay rent even if prevented from using the premises for their permitted use. He dismissed both appeals.

The judgement will come as a great disappointment to the many tenants who have refused to pay rent for premises they were unable to use due to government covid restrictions There is no hint that the cases will be referred to the Supreme Court.

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