Commercial Tenancies & COVID 19 Coronavirus Act 2020
The restrictions imposed by the UK Government to help fight the spread of Coronavirus have no doubt had a severe impact on businesses in the last few months. In order to protect businesses and the economy, the Government introduced provisions under Section 82 of the Coronavirus Act 2020 preventing Landlords from enforcing rights of forfeiture and re-entry by court proceedings, against relevant business Tenants for non-payment of rent during the relevant period.
The moratorium on forfeiture will effectively mean that Landlords will not be able to bring a lease to an end where Tenants fail to pay rent for the period between 26 March and 30 September 2020, or such later date as the Government may see fit to ensure adequate protection for businesses. The Government have already extended the initial period from 30 June 2020 to 30 September 2020 and can continue to extend same if they feel it is appropriate.
The key features of the legislation are:-
It provides a moratorium on forfeiture of commercial leases for non-payment of rent. “Rent” is defined to include any amount payable under the lease and, taken literally, this applies to all payments required to be made by the Tenant including service charge, insurance payments, utilities and so on.
The moratorium will apply to all business Tenants as defined in Part 2 of the Landlord & Tenant Act 1954.
The moratorium applies as from 26 March and has now been extended until 30 September 2020, or such later date as may be specified. This means that, whilst the moratorium is in place, a Landlord will not be able to evict a Tenant for non-payment of rent
It doesn’t stop the rent still being payable and leaves the tenant open to contractual or other enforcement.
Failure by the Tenant to pay rent during the moratorium period is removed as a ground of objection by a Landlord to a new tenancy under the Landlord and Tenant Act 1954
Once the legislation has lapsed (currently scheduled for 30 September 2020) a Landlord will be able to claim for forfeiture for both payments that became due during the moratorium period, and for any becoming due but unpaid after it ends
The legislation does not apply to a short lease (i.e. a lease for less than six months). Landlords whose Tenant is on a lease of 6 months or less can therefore still forfeit their Tenant’s lease.
In addition to the moratorium on forfeiture, the Act also prevents Landlords (until at least 30 September 2020) from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 189 days or more of unpaid rent.
Coronavirus Act 2020
Whilst the Coronavirus Act 2020 is not a complete silver bullet for Tenants looking to manage their cashflow, it is a short term tool for business’ to preserve cash flow. Tenants should however be aware that following the expiry of the moratorium period, the right to forfeit will arise again, unless the period is extended. Where a Tenant has withheld payment of the March and/or June 2020 quarter’s rent without its Landlord’s consent, it would therefore be well advised to open a dialogue with the Landlord before the expiry of the mortarium period in September 2020.