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Further hope for commercial landlords in respect of Covid-19 rent arrears

View profile for Brianna Garley
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This week saw summary judgment handed down in respect of London Trocadero LLP v Picturehouse Cinemas Limited and Others [2021] EWHC 2591 (Ch). This continues on from previous decisions, including CRI v TFS Stores [2021] EWHC 863 (Ch) and BNY Mellon v Cine-UK Ltd and Others [2021] EWHC 1013 (QB), in which both Judges found in the landlords favour (although Cine-UK have recently won permission to appeal the Judgment).

Summary of facts

This claim was for recovery of rent arrears in the region of £2.9million which had been building up since June 2020. The Defendant tenants were a cinema and throughout much of this period had been unable to use the premises as a cinema (being the permitted use under the lease) due to the restrictions that had been imposed by the Government.

Defence

The Defendants tried to argue the following:

  1. That there was/should be an implied term into the leases to the effect that payment of rent and/or service charges should be suspended during any period where the premises could not be used as a cinema, or where attendance would not be at a level consistent with what the parties had anticipated when entering into the lease.
  2. That there was a failure of consideration as the payments due under the leases were for the use of the premises as a cinema and, therefore, no payments were due if the premises could not be used for that purpose.

Robin Vos (sitting as a Deputy Judge of the High Court) rejected both of the above arguments.

The Defendant’s also attempted to argue that the landlords application for summary judgment should be adjourned and/or dismissed entirely on the basis that the Government will shortly be introducing a binding arbitration process in respect of rent arrears accumulated as a result of Covid-19. This argument was also rejected and the Court were not prepared to adjourn the hearing pending further news on that legislation being announced.

This Judgment signals that Court proceedings for recovery of rent arrears remain a valid means for rent recovery (notwithstanding the proposed legislation for a binding arbitration process for Covid rent arrears next year).

It serves to reinforce the point that commercial tenants who can pay their rent should do so and that arguments that tenants have used to not pay have no real prospects of success when before the Courts.

Summary judgment was awarded in full.

"The only reasons put forward as compelling reasons why the claims which are the subject of the summary judgment application should go to trial are those which I have already rejected in refusing to adjourn the hearing of the summary judgment application (the appeal process in relation to the Cine-UK case and the proposed introduction by the UK Government of a binding arbitration process in respect of rent due in the circumstances arising in this case). For the reasons set out in my judgment in respect of the adjournment application, these are not compelling reasons why the relevant issues should go to trial." – DJ Robin Vos in his judgment.

No doubt the Courts will now see an influx of rent arrears recovery cases prior to the Government’s proposed arbitration process.

As a reminder to commercial landlords, the moratorium on forfeiture of commercial leases as a result of Covid-19 rent arrears was extended until 25 March 2022.

If you are a commercial landlord requiring assistance recovering rent arrears, please contact Brianna Garley in our Property Litigation department.