Trocadero -v- Picturehouse Cinemas: Implied COVID Rent Suspension Clauses?

In an ongoing saga of decisions surrounding the topic of rental liabilities sustained by commercial tenants during the pandemic, this case has seen the High Court address whether such liabilities are able to be suspended for those periods during which the permitted use of the premises is unlawful.

London Trocadero (2015) LLP v Picturehouse Cinemas Limited [2021] EWHC 2591 (Ch)

This case concerned two leases held by Picturehouse Cinemas Limited ('PCL') under which the permitted use of the premises' was, as you had probably already guessed, a cinema. However, as a result of COVID restrictions the permitted use became unlawful for large parts of 2020 and 2021 and, by direct consequence of this inability to operate, PCL took only ￡247,000 in revenue as compared to ￡8.92m for a similar period in 2018-19.

The failure to meet their rental liabilities under the respective leases which followed is what led to the claimant issuing proceedings for the ￡2.9m in unpaid rent.

In defending the claim, PCL raised (amongst other things) an argument that a term should be implied into the lease to the effect that the payment of rent and service charge should be suspended during any period for which the use of the cinema is illegal and/or during which the attendance would not be at a level commensurate with that which the parties anticipated at commencement of the lease.

Unfortunately for PCL, the court remained unconvinced as to this assertion and confirmed that?the default position is that nothing is to be implied into a contract - with such a presumption being strengthened by the level of detail and evidential completeness of the leases concerned in this matter.

PCL also attempted to assert that (1) the term was so obvious that it ought to be implied and (2) the term, if implied, would give the lease ‘business efficacy’.

However, once again the court refused these arguments. As to the obviousness of the implied term. the court relied upon the fact that the landlord expressly gave no warranty as to use and the parties specifically addressed their minds to the circumstances when rent should be suspended by virtue of a rent suspension clause. As to?whether?the term, if implied, would give the lease ‘business efficacy’, the court stipulated that that it made no commercial sense why the loss should necessarily be borne by the landlord as the requirement for the PCL to pay rent even though the premises could not be used does not deprive the leases of business efficacy or lack commercial or practical coherence.

As the landlord-friendly judgements appear to have continued, it appears the last hope for tenants is the Government’s proposals for binding arbitration.

If you have any queries as to the means available to landlord's for the recovery of arrears during the COVID-19 pandemic, or would simply like to know more, please do not hesitate to be in touch:?[email protected].