As well as various financial measures the Government has also sought to alleviate the problems of businesses during the current lockdown with specific legislation relating to commercial leases as set out in the Coronavirus Act 2020 (“the Act”).
Under section 82 of the Act a landlord may not enforce a right of re-entry or forfeiture under a relevant business tenancy for non-payment of rent by action or otherwise between now and 30 June 2020. This period may be extended.
In particular, this precludes the landlord from peaceably re-entering the property during this period; re-entry is a draconian remedy which can cause considerable problems for tenants who are unable to pay their rent within a reasonable period as they are immediately shut out of the property. Their only recourse is to apply to the court for relief from forfeiture.
The Act applies to all tenancies to which part 2 of the Landlord & Tenant Act 1954 applies. This will include contracted out tenancies as, of course, the 1954 Act does still apply to them. Where forfeiture proceedings have commenced before the Act came into force, any order for possession must ensure that the tenant does not have to give up possession until after the end of the relevant period.
It is very important to note that the Act does not provide a rent holiday. The tenant’s obligation to pay the rent on the due date still continues; it is just that any breach cannot be enforced. Accordingly at the end of the relevant period, the whole of the rent which has fallen due during that time will still be payable, and any failure to pay will then be subject to re-entry or forfeiture.
Moreover, the Act only applies to non-payment of rent. Forfeiture for other breaches of the lease remains unaffected. However, there will clearly be issues with court hearings during the current lockdown period.
It is also worth noting that the Act provides that no conduct by or on behalf of a landlord, other than an express waiver in writing, will be regarded as waiving a right of re-entry. This obviates the difficulties landlords often face in inadvertently waiving the right to forfeit once the right has arisen.
Accordingly, if a tenant foresees continuing difficulties over a longer period because of damage to their business, they would be advised to seek agreement with the landlord to either reduce the rent or obtain a rent holiday while the current restrictions remain in force.
By the same token landlords may consider it sensible to alleviate the problems of their tenants if they are not to be left with a significant void period if the tenant becomes insolvent.
If you require any further assistance with the new provisions under the Act and/or with negotiations for new temporary arrangements, please contact us on 01483 887766 or email us.