Hard hit by the pandemic, several large cinema chains have been testing new legal arguments to try to avoid paying rent for periods when they were forced to close.

Despite their landlords being granted summary judgment for the repayment of arrears in full in the High Court in 2021, Cine UK and Cineworld (along with other cinema chains) appealed against the decisions in London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and other [2021] and Bank of New York Mellon (International) Ltd v Cine-UK Ltd and other appeals [2021].

The tenants had unsuccessfully argued that the leases had been frustrated by the Covid-19 pandemic in the first instance but appealed on the basis of a novel argument – that the premises were rendered “unfit for use” under the terms of the leases, due to government lockdown legislation. The clauses of the leases (which are in the context of insurance) stated that rent was not payable where the property was “damaged or unfit for occupation”. The usual interpretation of such clauses is narrow and refers to physical damage to the premises only.

The judges in the Court of Appeal agreed that the narrow interpretation was correct, and the parties could not have intended at the time of drafting for cover situations such as a pandemic rendering the premises unusable. Whilst financial “damage” had been suffered by the tenants, this was held by the court not to be akin to damage to the actual premises, when addressing the wide interpretation of the clauses in the tenants’ arguments.

The cinema tenants had hoped for a more tenant-friendly outcome, however, in light of the Commercial Rent (Coronavirus) Act 2022, which gives parties the opportunity to apply to arbitration to determine the amount of arrears which should be payable in light of the parties’ financial positions.

It may be that Cine UK and Cineworld have one last throw of the dice and try and appeal this decision given the size of their pandemic rent liability which could threaten the viability of their businesses but it will be interesting to see if there are any further arguments they could raise.

For more information on enforcing the payment of commercial rent arrears, as well as the commercial rent arbitration scheme please see some previous coverage below: