One of the more controversial property cases to arise out of the pandemic, London Trocadero (2015) LLP v Picturehouse Cinemas Limited, has started its 3 day hearing at the Court of Appeal today. The case concerned the tenant's rent arrears, and whether rent still fell due during periods where the tenant's business had been ordered to close as part of the government's Covid-19 public health orders.
Depending on whether one has a pro-landlord or pro-tenant stance, the tenant's arguments (mainly around an implied term regarding use of the premises, and failure of consideration/basis) were either creative to the point of fanciful, or a sensible approach that leads to a fair allocation of risk between the parties in the face of extremely unusual circumstances.
Since the proceedings were launched, the government has of course stepped in with the Commercial Rent (Coronavirus) Act 2022, which drastically alters the relationship between landlord and tenant by forcing the parties into mandatory arbitration for Covid rent arrears, with the possibility of arrears being written off entirely by an arbitrator. Notwithstanding, the principles which will be decided by the Court of Appeal (and maybe the Supreme Court?) will be of interest to landlord and tenant lawyers as they seek to navigate lease drafting and allocation of risk in a post-pandemic world.
The outcome will have wide-ranging implications, not only in the landlord and tenant context, but in any case where it is said that there has been a failure of the basis upon which a contract has been entered into.