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Cinema operators who were forced to close during COVID-19 lockdowns have failed to convince the Court of Appeal that they should be relieved of the obligation to pay rent. In a guideline ruling, the Court found that it was the tenants, not the landlords, who bore the risk of cinemas becoming incapable of lawful use for their intended purpose.
The tenants of two cinemas asserted that their obligation to pay rent was suspended during periods when they were required to close by the Coronavirus Regulations. They argued that the entire purpose of their leases was defeated when they were banned from operating the premises as cinemas.
They further contended that terms should be implied into their leases which did away with their rent obligations whilst the cinemas could not lawfully be used as such. However, those arguments fell on fallow ground and, in each case, their landlords were granted summary judgment on the basis that they had no viable defence to claims for rent arrears.
In dismissing the operators' appeals against those outcomes, the Court noted that the leases contained a carefully worked out contractual regime for the allocation of risk between landlord and tenant. The risk that the cinemas might become incapable of lawful use for their intended purpose was borne by the latter.
It was clear that the landlords' consideration for the operators' obligation to pay rent was to grant the latter exclusive possession of the premises for periods of 35 years. It could not, therefore, be said that the basis of the leases had entirely failed and there was no gap in their terms in which the principle of unjust enrichment could operate.
The Court found that the operators had come nowhere near to satisfying the stringent test that must be met before terms can be implied into a lease. There was no reason of business efficacy why the terms contended for should be implied in that both leases worked perfectly well without them. It had also not been shown that the implication of such terms was so obvious as to go without saying.