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2 July 2020

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The Coronavirus Act – Commercial Property Tenancy Protections

Posted by: Nathan Hughes

On 25 March 2020 the Government passed The Coronavirus Act (“Act”), providing swift action in order to handle the COVID 19 pandemic. The Act support individuals and provided businesses with tools in an effort to keep them from going under.

Commercial property is one area that features in the Act, with Section 82 providing relief by suspending a landlord’s right of forfeiture (the right of the landlord to end the lease) for unpaid rent. We explore Section 82 below.

Under Section 82(1) of the Act, the right of forfeiture for a tenancy in an applicable property (relevant business tenancy) for non-payment of rent cannot be enforced during the relevant period.

  • A relevant business tenancy is defined as a tenancy to which Part II of the Landlord and Tenant Act 1954 applies (the leasing commercial business premises in England and Wales) and includes tenancies that are “contracted out”. A tenancy for six months or less is not included. (This is not an exhaustive list for the purposes of Section 82(1))
  • The relevant period under the Act is 26 March 2020 to 30 June 2020.

Sections 82(5) – 82(9) of the Act governs the impact of the pandemic on possession proceedings and orders. The effects are such that:

  • If a landlord has issued and served court proceedings for non-payment of rent before 26 March 2020 they cannot recover possession earlier than the expiry of the relevant period.
  • Possession orders made before 26 March but under which the date for possession would expire within the protected window are caught also.

In the High Court the original order remains until the tenant applies to vary it. If an application is made, the Court must allow the tenant until the end of the relevant period to yield up possession. In the County Court, this extension is automatic.

New Developments

On 17 June 2020 two new regulations came into force which will affect section 82 of the Act.

  • Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2020 (SI 2020/602) (English Regulations 2020)
  • Business Tenancies (Extension of Protection from Forfeiture etc) (Wales) (Coronavirus) Regulations 2020 (SI 2020/606) (Welsh Regulations 2020)

(Together the “Regulations”)

The impact of the Regulations is that the relevant period has now been extended to 30 September 2020.

Other things to keep in mind

  • The Act does not cover all reason for right of forfeiture. A landlord is still entitled to enforce a right of re-entry for a breach of other covenants.
  • During the relevant period, the tenant will not be able to rely on any acts by the landlord as waiving the right to forfeit for non-payment from before the relevant period.
  • The Act also prevents landlords (until at least 30 September 2020) from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 189 days or more of unpaid rent.
  • The Government has the discretion to extend the relevant period again.

What does this all mean?

One common misconception is that a tenant does not have to pay rent under the lease during the relevant period. This is not the case. The protection is simply a period by which the landlord cannot invoke the right of forfeiture. When the moratorium expires, the landlord will be entitled to forfeit the lease for non-payment of the accrued arrears.

The Act and Regulations offer temporary assurance to businesses that they will not be forced out of premises in the next three months. Many businesses have experienced dramatic reductions in cash flow as a result of the pandemic and these measures will help ease pressure on businesses that feared looming eviction from their premises. However, tenants experiencing a dramatic decline in business will still need to find the means to pay the rent eventually.

We act for both landlord and business tenants. If you’re struggling and would like to discuss your legal options we can help.

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Nathan Hughes - Trainee Solicitor

To discuss how Glaisyers can assist you contact Nathan Hughes on nathan.hughes@glaiysers.com or via 0161 832 4666.

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