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Business tenants now have temporary reprieve against eviction for non-payment of rent – at least until 30 June 2020 – but many issues remain with regard to business leases and the effect of the ongoing lockdown.

Where a lease is protected under the Landlord and Tenant Act 1954, the tenant may remain in occupation at the end of the lease term and may apply for a new lease provided that (along with other key requirements) the premises are “occupied” by the tenant for the purposes of its business.  It remains to be seen if a tenant who is forced to close by the lockdown, and who does not re-open prior to the end of the lease term would be treated as occupying the premises for the purpose of the Act’s protection.

If closure is forced due to the premises being physically damaged and needing reinstatement, a tenant may need only show an intention to return into occupation once the repairs are completed, perhaps by continuing to be responsible for the premises related outgoings.  Would a similar tenant-friendly approach equally apply to a closure forced by the lockdown, particularly where the cash saving measures taken by some tenants may seem inconsistent with an intention to reoccupy?

Notably, most leases will include provisions anticipating that occupation (and indeed rent) would be suspended following damage by fire and other catastrophes, but resumed once the damage is repaired.  Similar provisions dealing with a Government enforced lockdown scenario are likely to be rare.

Business tenants will be keen to mitigate their ongoing lease obligations where possible, some perhaps with short term underlettings of part or of the whole all of the premises to a business that is able to trade during the lockdown.   Where the premises are underlet or are otherwise occupied by a third party, it is the undertenant or third party who will usually be deemed to be in occupation, and not the tenant.  Under those circumstances, and unless it is able to return into occupation prior to the end of the term, the tenant would be excluded from protection under the Act.

What of the opposite scenario where a tenant would like to terminate its protected lease at the end of the term?  In principle, the tenant would need only cease occupation before the end of the lease term – a largely straightforward task under normal circumstances.  However, where the term is due to expire during lockdown, unless the tenant has already clearly vacated the premises, it may now encounter difficulties with any effort to do so during lockdown, not least where external/third-party assistance is required for the move.  Where the tenant cannot vacate before the expiry of the term, it may simply have to give the minimum three months’ notice required by the Act, and may crucially then have to pay any additional rent due for its occupation beyond the expiry of the term.

The question of occupation could therefore be of interest where a protected lease is due to expire during the lockdown period.