COVID-19 and Commercial Property: protections under the Coronavirus Bill
The Government has moved swiftly to incorporate protection for business under the emergency legislation, presently with the Coronavirus Bill.
These provisions offer support to businesses within the property sector and will affect the relationship between landlords and tenants throughout the relevant period (presently to 30 June 2020 but with provision to be extended).
Protection from eviction for commercial tenants
Commercial tenants will benefit from a moratorium on forfeiture over the relevant period, to prevent any business lease is being terminated as a result of the tenant’s failure to pay rent. The relevant period is defined as the period to 30 June 2020, but there is a provision to extend this as circumstances require.
Forfeiture is a tool available to a landlord to terminate a lease for non-payment of rent or breach of the lease. It enables the landlord to apply to the Court to terminate the lease, or simply change the locks.
The relevant period relates to the act of forfeiture, ie when enforcement is undertaken, rather than the date on which the rent became due. The legislation, therefore, protects tenants not just from a failure to pay the rent due on 25 March 2020, but any rent (being rent or any sum reserved as rent being service charge, insurance rent etc) presently owed.
From the landlords perspective, acknowledging this moratorium does not in itself prevent it from enforcement on expiry of the relevant period, as the legislation provides that no conduct by the landlord short of an express waiver in writing, is to be regarded as waiving the right of re-entry.
Where forfeiture proceedings have already been commenced, no court may require the tenant to give up possession of the property before the end of the relevant period.
Looking beyond forfeiture, and beyond this unprecedented period of the pandemic, any failure to pay rent during the relevant period will be disregarded for the purposes of determining whether the landlord may have grounds to oppose the grant of a new lease to the tenant under the Landlord and Tenant Act 1954 (persistent delay in paying rent which has become due).
Some words of caution
This is designed to give a breathing space to tenants to seek to agree to rental concessions with landlords. It needs to be made clear that this represents only a protection against forfeiture action, there is no suspension of other tools available to the landlord in the event the tenant fails to pay rent, for example,
- commencing insolvency proceedings against the tenant
- taking action under CRAR (commercial rent arrears recovery scheme) to seize tenants goods on the premises to cover the rent arrears
- drawing down on rent deposits
- pursuing guarantors.
It is implicit that the government is hoping that landlords and tenants will seek to come together to seek to find a commercial way forward given they both have common interests to ride out the Covid 19 storm. The express provision in the legislation to provide clarity on what will (and will not) constitute a waiver by a landlord of the right to forfeit is welcomed- negotiations between landlords and tenants can take place without the landlord fearing acts to assist tenants will compromise them beyond the expiry of the relevant period.
If you need to explore these issues in further detail, please contact Nigel Maguire.
Alternatively, if you or your business require advice for any commercial property matters, please get in touch with our specialist Commercial Property team through this website or by calling 0330 404 0778.
This information is correct at 9.00am on 26 March 2020.
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