Lights, Camera … Landlords can take action!

Regular readers of our articles, and those that keep themselves up to date on Commercial Landlord and Tenant issues generally, will be aware that the measures introduced in response to Covid 19 included the introduction of moratorium on forfeiture of Leases on the grounds of rent arrears.  The moratorium. Which prevents Landlords from forfeiting leases on the basis of rent arrears, was extended until late March 2022 earlier this year.

For some Landlords whose tenants are in arrears with their rent, the moratorium has been, and continues to be, a source of huge frustration, as they have been left feeling that there is little they can do to address the non-payment of rent.   Whilst Landlords have throughout the pandemic have been able to pursue debt claims if they wish to do so, there has been a reluctance in some quarters to take that course of action, especially when the tenant in question has been unable to trade. 

A recent High Court case, in which Judgment was handed down in late September 2021, however, may provide some comfort to Landlords, with the Court confirming that Landlords are entitled to pursue Judgment for unpaid rent in circumstances were their tenants have been unable to trade due to the pandemic. 

The background to London Trocadero (2015) LLP and Picturehouse Cinemas Limited and others [2021] is straightforward enough.

  • The parties entered into two Leases (one dated 20 June 1994 and the other 18 September 2014) of Cinema premises at the Trocadero Centre in London, Picturehouse Cinemas Limited being the Tenant. Trocadero, the Landlord, had owned the Trocadero Centre since 2015.
  • The Leases obliged Picturehouse to pay the rent without any deductions.
  • The premises were permitted to be used as a Cinema.
  • The Lease contained a clause making it clear that nothing in the Leases amounted to a warranty by the Landlord that the premises could lawfully be used for the permitted use.
  • Due to measures introduced in response to the Covid pandemic, Picturehouse was forced to Picturehouse claimed in evidence that between 23 March 2020 to 16 May 2021 the premises were only open for 71 days, and that takings were £247,000 as compared to £8.91million for the period 23 March 2018 to 16 May 2019.
  • Picturehouse failed to pay rent due and owing under the Lease. Together with unpaid Service Charges, arrears of £2.9million accrued between June 2020 and July 2021.
  • London Trocadero issued a debt claim against Picturehouse, which was defended by Picturehouse who said that they were not liable for the rent and service charges that had arisen in relation to the periods when, due to measures introduced to combat the spread of Covid, the premises could not be used as a Cinema.
  • Picturehouse argued that:-
  1. As measures introduced in response to Covid rendered it unlawful for the premises to be used in the manner envisaged by the parties, a term should be implied into the Lease which suspended Picture House’s obligations to pay sums to the Landlord during the periods that the premises could not be so used.
  2. That there had been a failure of consideration on the basis that the sums that were being pursued related to premises which Picturehouse were unable to use in accordance with the permitted use, and that as such, Picturehouse should not be required to pay any sums due under the Lease throughout the period that the premises could not be used as a Cinema. 
  • The Landlord applied for Summary Judgment.

Handing down Summary Judgment in favour of Trocadero, the Deputy Judge Robin Vos, highlighted that “there is a long standing principle that an inability of tenant to use premises for the purpose intended at the time the lease was granted will not provide a defence to a claim for the payment of rent”.

As regards the ‘implied term’ defence, the Court concluded that the requirement to Picturehouse to pay rent even though the premises could not be used for the intended purpose did not deprive the Lease of business efficacy, and the circumstances of the case were such that it was appropriate or necessary to imply a term providing for the suspension of rent or service charges.

Clearly each case will need to be reviewed in its own merits, with the terms of a Lease in any given case having to be carefully considered. For the most part however, Landlords should be reassured by the Trocadero case.

If you have any queries arising from the above, or would like to suggest a topic for a future article, please contact Chris Drinkall on 01482 337367 or christopher.drinkall@rollits.com Chris can also be followed on Twitter at @drinkall_chris and on LinkedIn.

Emma Richards

Posted on: 08/10/2021

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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