Until 30 June 2020 the Coronavirus Act 2020 prevents a landlord forfeiting a commercial lease when a tenant is in arrears of the rent due under the lease. The Act anticipates that this period of prohibition may be extended.
Until this prohibition is lifted and which may yet be extended, forfeiture by a landlord by way of peaceable re-entry or proceedings is suspended until 30 June 2020. The prohibition does not all mean that a tenant is not liable to pay the rent (or any interest which may be payable under the lease) only that a landlord’s right to forfeit is temporally suspended.
Presently a landlord’s other remedies to enforce rent arrears remain for example, pursuing guarantors, serving statutory demands, pursuing the Commercial Rent Arrears Recovery scheme and enforcing against tenants’ assets and debt recovery under the Pre-Action Protocol and court proceedings.
The prohibition provided by the Act applies to all tenants and lawful occupiers of “all commercial leases” who are in arrears of rent regardless of whether the arrears are COVID-19 related, whether their sector has trading restrictions and the tenant’s financial circumstances.
The definition of ‘rent’ in the Act is broad and therefore includes all any sums payable by a tenant under a lease namely, rent, service charges, and insurance.
Where rent is payable on the ‘usual quarter days’ the prohibition applies to the non-payment of any rent due on the March and June quarter days. Where rent is due on the ‘modern quarter days’ or monthly, the prohibition will not cover non-payment rent due from when the prohibition is scheduled to end after 30 June 2020.
Whilst the prohibition remains, landlords cannot cite a tenant’s non-payment of rent in opposing renewal of a business tenancy under section 30(1) of the Landlord and Tenant Act 1954. This ground was rarely cited any impact will be minimal.
Where proceedings have been commenced before the Act came into effect for possession under lease forfeiture provisions regarding non-payment of rent, the Court will not proceed to order possession within this period ending 30 June 2020. If an order for possession has been granted, possession will not be given until 1 July 2020.
Landlords will be concerned that their premises which may become vacant due to their tenants inability to trade during the lockdown may be occupied by trespassers or other unauthorised occupiers. The prohibition under the Act does not apply to such persons.
Once the prohibition is lifted landlords will be considering the commerciality of forfeiting a lease as against the potential uncertainties the future economy may have on a landlords’ ability to quickly re-let the premises and also at the same rent or higher rent.
This blog was written by: Polly Hill
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.