There has been another big decision in favour of Landlords on the topic of Covid rent arears with the decision in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd.
This case relates to arrears that accrued between June 2020 and July 2021 during which there were at least partial closures of cinemas. £2.9 million of rent arrears and service charge payments went unpaid and the Landlord decided the take action through the court. This started well before the mandatory arbitration scheme was implemented for those of you wondering why this claim is going through the courts.
Originally judgment was awarded for the Landlord which in turn created a precedent that many landlords relied upon in pursuing covid arrears through the courts by obtaining a money judgment rather than more common enforcement mechanisms for commercial leases like forfeiture or CRAR which were at the time not allowed.
This Court of Appeal case is following permission to appeal being granted to the tenants following the high court decision. The tenants appeal was based on three main points:
- That is a fundamental term of the lease that the premises would be capable of lawful use;
- That there is an implied term that if the premises cannot be used for lawful use then rent should not be payable; and
- That the criteria fordamaged and not fit for occupation and use should also include non-physical damage as well. Therefore financial damage should fall within this designation.
Following permission to appeal having been granted, the Court of Appeal reaffirmed the High Courts decision and rejected the appeal on all three fronts. The court found that amongst other points, the established position that for a clause to be viewed as an implied term, it needs to be so obvious as to go without saying, should apply in this case of an enforced lockdown. The absence of this provision within the lease means that rent continues to be due even if the property cannot be lawfully used.
This decision whilst an obvious win for commercial landlords, also emphasises the need for a well drafted and comprehensive lease. Many landlords and tenants are now insisting on pandemic protection and force majeure clauses to be included in their leases to avoid this sort of confusion in the future.
