Tenants including Cine-UK and Cineworld have lost two closely watched cases about rent arrears built up during Covid lockdowns.
In a ruling handed down today, a three-judge panel at the Court of Appeal dismissed both claims.
Lawyers for the tenants have argued that their premises were “rendered unfit for use” by government lockdown legislation during the Covid-19 pandemic, which means the tenants were not liable to pay rent during the period.
The cases are London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2021] EWHC 2591 (Ch); [2021] EGLR 43 and Bank of New York Mellon (International) Ltd v Cine-UK Ltd and other appeals [2021] EWHC 1013 (QB); [2021] EGLR 26.
The issue at the heart of both cases is whether government legislation during Covid, which closed non-essential shops, cinemas, theatres and other buildings on the grounds of public health, rendered those buildings unusable.
The Picturehouse case is being brought by the landlords of the Trocadero Centre in Piccadilly Circus, W1. It is the location of Picturehouse’s flagship cinema, Picturehouse Central. . The Bank of New York Mellon case is was brought by Cine-UK, and relates to a cinema at a shopping centre in Hengrove, Bristol. The bank is the landlord.
Both sets of tenants lost in the High Court last year. They challenged the judgment and the Court of Appeal heard both cases together last month. Both sets of landlords are requesting summary judgment.
At last month’s hearing, Jonathan Seitler QC, who represented both cinema chains, quoted Cine-UK’s lease, which stated that rent may not be payable if the property is “damaged” and “not fit for occupational use”. He argued that the word “damage” was broad enough to include financial or non-physical damage such as was caused by the government restrictions imposed during the pandemic.
However, Sir Julian Flaux, who wrote today’s judgment, said there were “a number of problems with this argument”.
“It cannot be said that the property, which is not a legal entity, has suffered financial or economic damage: rather it is the… tenant which has suffered that damage,” he said.
Under both leases “the obligation to pay rent was only suspended where the cesser of rent clauses applied”, he said.
“Namely where there was physical damage to or destruction of the premises by an insured risk rendering them unfit for occupation or use.”
“Both these appeals must be dismissed,” he said.
“This appeal was always going to be an uphill battle for the tenants,” said Emma Preece, a senior associate at Charles Russell Speechlys.
“The High Court originally found in favour of the landlord following its summary judgment application, meaning the court was satisfied that the tenants’ defences had no real prospects of success. The dismissal of the appeal was therefore anticipated but still provides a warning for tenants who have been unable to reach an agreement with their landlord on rent accrued during the pandemic which falls outside the binding arbitration scheme.”
Jonathan Warner-Reed, a partner at Davitt Jones Bould, said the ruling “represents a growing list of decisions in the landlords’ favour”.
“The courts have consistently refused to depart from established legal principles to accommodate difficulties faced by tenants following the Covid-19 pandemic,” he said.
