The Government has passed emergency legislation – the Coronavirus Act 2020 – which went through Parliament in one day on 25th March. It provides business tenants with immediate protection from forfeiture by landlords for non-payment of “rents”.
The government has given business tenants immediate protection (a Moratorium) from forfeiture for non-payment of “rents” (see below). The Coronavirus Act gives a period of protection which will run to 30th June 2020, or any later date the Government decides. Given the current closures and lockdown, it seems likely that that date will be extended, potentially to avoid immediate forfeiture on 1st July for non-payment of the June quarter’s rents.
The Moratorium on forfeiture only applies to non-payment of “rents”, which is defined as “any sum a tenant is liable to pay under the relevant business tenancy”. Aside from the core rent payable under a lease, it seems that this wording will also include any other payments due, whether reserved as rent or not e.g. insurance or service charges. The Moratorium does not prevent action for other breaches of a lease.
Most tenants of business premises are protected. The definition of business premises is the same as that used in the Landlord and Tenant Act 1954 and so includes all tenants not excluded from that Act. A lease will set out whether or not it is excluded, but this definition may include others who do not have a lease. The applicability is wide, and most business tenants/occupiers will be protected from forfeiture under the Moratorium.
The landlord of a business premises will not be able to exercise the self-help right of forfeiture i.e. go in to the premises, change the locks, and recover possession. Equally landlords will not be able to enforce any existing Court proceedings e.g. an Order for Possession. Practically speaking, the Moratorium stops landlords from bringing the lease to an end by forfeiture.
However, the Moratorium is simply a suspension of a Landlord’s right to forfeit, it does not take away that right. The Moratorium does not stop a tenant from having to pay all rents as they fall due and comply with the other covenants of a lease (unless contrary agreement is reached between the parties to vary its terms).
The Coronavirus Act suspends forfeiture but does not stop other recovery methods for unpaid sums under the lease. Options for a Landlord may include:
Tenants should be aware that their lease remains as a contract and its terms need to be met. Tenants not paying their March and/or June quarter’s rent because of the Moratorium may feel the consequences as soon as it is lifted. Those tenants thinking in the longer term should be contacting their landlord or their appointed agent to discuss options and agree a way forward.
Some major landlords have waived rents for March, others have rolled them forwards to review in June or September, others have offered a change to monthly payment so cash flow can be monitored.
However, there is no obligation upon a landlord to vary the terms of the lease: the rents still fall due, interest may accrue, and landlords are likely entitled to the costs of recovery of any unpaid rents. Ultimately landlords remain and will be entitled to their premises back, if they so wish, the only question is when.
For more information please speak to Ben Lomer at email@example.com or +44 (0)20 7216 5570 or to your usual Druces contact.