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COVID-19 and the Coronavirus Act 2020 for business tenancies – a summary

The Coronavirus Act 2020 was given Royal Assent overnight on 25 March 2020 and contains provisions to protect business tenants from forfeiture.

Key Features

Forfeiture/Re-entry for non-payment of rent

No landlord is entitled to re-enter premises or issue proceedings for forfeiture for non-payment of rent under a business tenancy until 30 June 2020 (or any later date that the Government might set).

Rent includes any sum a business tenant is liable to pay under their business tenancy and will therefore include service charges, insurance and any other payments due.

A tenant does not have to show that the failure to pay rent has arisen as a result of the Coronavirus (COVID-19).

Commercial landlords (unlike residential landlords) are still permitted under the Act to seek a right of re-entry or forfeiture in the usual way for other breaches of lease.

Existing Forfeiture proceedings

Any existing possession orders are extended so that they do not require the tenant to give up possession before 30 June 2020.

Payment of rent during the relevant period

The Act does not give tenants a ‘rent-free’ period and tenants are still expected to pay the rent including any accrued interest during this time. If such payment is not made landlords will be entitled to seek enforcement of the lease by re-entry or forfeiture after 30 June 2020 (or any later date that the Government might set).

Persistent delay or failure to pay rent may also result in a business tenant not being able to exercise a break clause in the lease.

Waiver

During the “relevant period” no conduct by or on behalf of a landlord, other than an express waiver in writing, will be treated as waiving the landlord’s right to forfeit for non-payment of rent. Although, landlords should be cautious in their approach as their conduct may still amount to a waiver of their right to forfeit for other breaches of lease.

Other remedies

Although landlords cannot forfeit for non-payment of rent before 30 June 2020 the Coronavirus Act 2020 does not prohibit landlords from taking other enforcement action for non-payment of rent such as:

  • issuing a money claim for damages for breach of contract,
  • debt recovery against a guarantor,
  • using Commercial Rent Arrears Recovery (CRAR) to take control of a tenant’s goods
  • serving a statutory demand.

As a consequence, on 23 April 2020 the Government announced further protection to commercial tenants and pushed a strong agenda to encourage landlords and tenants to work together where possible to reach agreements on outstanding debts.

The new measures are expected to temporarily prevent landlords from serving statutory demands between 1 March 2020 and 30 June 2020 and stop winding up petitions being presented from 27 April 2020 to 30 June 2020 where tenants are “unable” to pay their bills solely as a result of the Coronavirus outbreak.

Furthermore, secondary legislation is also expected which will prevent landlords from using Commercial Rent Arrears Recovery (CRAR) to seize assets unless 90 days or more of rent is outstanding.

Summary

In these unparalleled times landlords and tenants are encouraged to work together to seek commercial resolutions where appropriate. If you are a business landlord or tenant concerned about any issues regarding your business tenancy please do not hesitate to contact us directly for bespoke legal advice.

Click here for a more detailed legal note.

Correct at time of re-drafting (29 April 2020)

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