The Government has announced extra protection for businesses by placing a temporary restriction on landlords’ ability to enforce re-entry or forfeiture for non-payment for at least three months so that those who cannot pay their rent because of cashflow difficulties related to the coronavirus will be protected from eviction.
The measures contained within Section 82 of the Coronavirus Act 2020 (the Act) (passed on 25 March 2020) will mean no business will be forced out of their premises if they miss a payment in the next three months. The key points are:
Protection from eviction
Following the Government’s recent announcement, landlords will not be able to forfeit a commercial tenant’s lease for non-payment of rent for the next three months. In most standard leases the right to forfeiture does not arise until a certain period of time has elapsed (lease dependent but usually between 7 and 21 days). Rent payable on 25 March, which remains unpaid after the relevant period under the lease, a landlord will not be able to forfeit. This also appears to extend to any other rent payment pattern such that any rent if unpaid, whenever it fell due, will be caught.
Who will be protected and how long will the moratorium last?
The measures apply to all business tenancies in England, Wales and Northern Ireland and will last until 30 June 2020 (Section 82(12)(b) of the Act), with an option for the Government to extend if needed. It should be noted that the measures only suspend a landlord’s right to forfeit for the period of three months (ending 30 June 2020); it does not extinguish a tenant’s liability to pay rent under the lease. Unless the current deadline of 30 June 2020 is extended, a landlord’s right to forfeit will again arise on 1 July 2020.
Which payments are caught by the moratorium?
The measures apply to any sums a tenant is liable to pay under the lease (Section 82(12) of the Act). Depending on the terms of the lease, this could include service charges, insurance rents, landlord’s costs and interest in addition to the basic or principal annual rent.
Are landlords’ other rights and remedies affected?
Other rights and remedies available to landlords do not appear to be affected by the moratorium, enabling landlords to pursue other options for non-payment of rent or other breaches of tenant covenants: exercising CRAR (Commercial Rent Arrears Recovery), suing for rent arrears, insolvency proceedings, including forfeiture for other tenant breaches but in these circumstances, service of a Section 146 notice pursuant to the Law of Property Act 1925 would be required.
Waiver by landlords
Pursuant to section 82(2) of the Act, no conduct by or on behalf of the landlord during the three months moratorium will be regarded as waiving the right to forfeit for non-payment of rent, other than giving an express waiver in writing.
The Act also makes provision in relation to ongoing court proceedings, ensuring that the courts do not grant orders for possession prior to expiry of the moratorium period.
Opposition by landlord to application for new business tenancy
One of the grounds on which a landlord can oppose the grant of a new tenancy is based on ‘persistent delay in paying rent which has become due’ (Section 30(1)(b) of the Landlord and Tenant Act 1954). Section 82(11) of the Act provides that any failure to pay rent during the period of the moratorium (whether rent due before or in that period) is to be disregarded for the purposes of determining whether the ground is established.
These measures will provide welcome reassurance to businesses struggling with cashflow and ensure no commercial tenant is evicted for non-payment of rent over the next three months. This will inevitably have significant ramifications for landlords and therefore it is imperative that parties maintain an open line of dialogue and support ongoing conversations about voluntary arrangements where possible, a stance supported by the Government, which will continue to monitor the impact on commercial landlords.