One consequence of the Covid-19 pandemic lockdown has been commercial tenants owing rent to their landlords. The recent case of London Trocadero (2015) LLP v Picturehouse Cinemas Limited does not offer much comfort to commercial tenants finding themselves in this predicament.
With their cinema in the Trocadero Centre in London’s West End forced to close during the lockdown, the tenant did not trade for many months. Even when the cinema was allowed to re-open, the trading conditions were very poor. This meant that the tenant had not paid any rent to the landlord since June 2020 and owed £2.9 million in rent and service charges.
The landlord issued a claim for damages against the tenant, the original tenant and the guarantor and sought summary judgment at an early stage in the claim. In its Defence, the tenant argued that given the unparalleled nature of the pandemic, additional terms should be implied into the leases suspending the payment of rent when attendance at the cinema was illegal or not at the level anticipated by the parties.
In addition, it was submitted in the Defence that there had been a failure of consideration. As the rental payments under the lease were for the use of the property as a cinema, when this use was not possible, the rental payments were not due.
Unfortunately for the tenant, these arguments were given short shrift by the Judge. There was no need for these supposed implied terms to be present in the lease to make the lease effective. The implied terms were also not so obvious that their presence went without saying so as to meet the necessary legal test.
This year has seen a series of similar cases where tenants have tried to come up with various legal arguments to avoid payment the rent under commercial leases, all without success. The window for landlords in a similar position to bring such claims against their tenants may be closing though as the government has announced that it is looking to introduce a binding arbitration scheme for commercial landlords and tenants facing rental disputes.
Ross Paterson, Solicitor, 18th October 2021