Cinema liable for rent arrears despite Covid enforced closures
A cinema has been told that it cannot defend a claim for payment of rent arrears and service charges on the basis that it was required by law to close during the Covid pandemic.
The case involved London Trocadero (2015) LLP and Picturehouse Cinemas Ltd.
Under the lease with the landlord, Trocadero, Picturehouse covenanted not to use the premises other than as a cinema. However, the landlord expressly gave no warranty that the premises could lawfully be used for that purpose.
As a result of Covid-19, regulations were imposed between March 2020 and July 2021 which either prevented cinemas opening or rendered the opening of the tenant’s cinema uneconomic.
No rent or service charges had been paid since June 2020 and the landlord claimed arrears of £2.9 million.
The High Court found in favour of Trocadero.
It dismissed Picturehouse’s argument that terms should be implied into the leases to the effect that payment of rent and service charges should be suspended during any period for which use of the premises as a cinema was illegal and/or during which attendance was not at the anticipated levels.
Such terms were neither so obvious that they went without saying nor necessary to give the leases business efficacy.
The tenants were required to pay rent even though the premises could not be used for the intended purposes because of unforeseen events; that did not deprive the leases of business efficacy or mean they lacked commercial coherence.
Without the implied terms, the risk was shouldered by the tenants, but there was no commercial reason why the landlord should necessarily bear the loss. Where the risk should lie was a matter for negotiation between the parties.
Further, given the express lack of warranty as to lawful use, and despite the covenant not to use the premises for any other purpose, it could not be said that it was obvious that the tenant should be excused from paying rent for any period when they could not be used as a cinema.
Moreover, the lease suspended payments if the premises could not be used because of being damaged; the fact that the parties had thought about suspension in certain circumstances showed that it was not obvious that a term should be implied providing for suspension in other circumstances.
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London Trocadero (2015) LLP v Picturehouse Cinemas Ltd
Chancery Division
28 September 2021
[2021] EWHC 2591 (Ch)
Judge Robin Vos