The Coronarvirus Act 2020 was passed on 25 March 2020, following which Parliament was suspended. The Act covers a wide spectrum of vital emergency legislation to deal with the pandemic the Country is facing.
For commercial landlord and tenants there are, amongst the sections on emergency volunteers and food supplies, provisions dealing with business tenancies. The Act provides the following in relation to tenancies to which part 2 of the Landlord and Tenant Act 1954 applies:
- A moratorium on forfeiture/re-entry for non-payment of rent during the relevant period. The relevant period ends 30 June 2020 but can be extended by statutory instrument.
- References to rent do include other payments due under the lease including service charges and insurance rent.
- To protect landlords, nothing you do during the relevant period is to be treated as waiving any rent unless you specifically give an expressed waiver in writing.
- The rent (including service charge and insurance rent) continues to accrue so that when the relevant period ends a landlord will be entitled to payment from the tenant. Tenants should remember that most leases include for interest to be applied to delayed payments at the interest rate in the lease.
- Non-payment of rent during the relevant period will not be treated as a failure to pay rent in circumstances where a landlord is opposing the 1954 Act renewal of a tenancy.
- There are some provisions dealing with the position on forfeiture proceedings that have already commenced, essentially delaying any right of the landlord for possession until after the end of the relevant period.
The Act will be used by some tenants, who are actually in a position to pay, as a way to preserve cash in their business. However, it should be remembered that the Act does not deal with, nor prevent the landlord from doing the following:
- issuing a statutory demand (£5,000 minimum debt for an individual, £750 for a company tenant) and taking formal insolvency proceedings if no payment is forthcoming. However, the High Court appear to be suspending winding-up petitions/bankruptcy petitions and adjourning hearings to a date in June. At the time of writing the District Registries still appear to be dealing with some petitions at present;
- issuing proceedings for non-payment/debt claim (although a landlord may be subject to any delays the courts imposes in listing hearings as mentioned above);
- CRAR (commercial rent arrears recovery) for arrears of principal rent;
- pursuing any guarantors who remain liable under the lease or pursuing any former tenant on “the hook” by way of an Authorised Guarantee Agreement; and
- drawing down on any rent deposit that they benefit from (in accordance with the terms of the same).
The Act does offer some immediate protection to a tenant from losing its right to occupy the premises it trades from, and this will be welcomed by tenants genuinely trying to keep their business going, but it is certainly not a “get out of jail free card”. Landlords still have other options in pursuing tenants for sums owed in the meantime, and once the relevant period is over, all sums that have fallen due and gone unpaid will be immediately due and payable (and most likely with interest).
If you would like more information, get in touch and speak to our real estate solicitors. Email us at firstname.lastname@example.org or call 023 8082 7451.
This article is being updated as the Government has announced new further measures to protect tenants.