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COVID-19 for Commercial Landlords and Tenants

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Coronavirus Act 2020

UK Public General Acts

The Coronavirus Act 2020 was given Royal Assent on 25 March 2020 (the Act) and most parts came into force the same day. Section 82 of the Act creates a moratorium period of three months, until 30 June 2020, during which landlords may not forfeit commercial leases for non-payment of rent. This period may later be extended by further regulations.

 

The moratorium applies to forfeiture by Court proceedings and physical re-entry equally in respect of non-payment of rent.

‘Rent’ for the purpose of the Act includes any sum a tenant is liable to pay under their tenancy and includes service charges, insurance or any other payment.

 

Tenants remain liable for rent during the moratorium, but non-payment up until 30 June 2020 cannot be actioned by forfeiture by the landlord.

Section 82 only applies to rent and not for breach of other covenants such as repair or permitted use.

 

Section 82 of the Act applies to two categories of tenancy.

 

First, it covers business tenancies under the Landlord and Tenant Act 1954, including those which are contracted out.  Even if tenants have had to close the premises business, for example because of the Health Protection (Coronavirus, Restrictions)(England) Regulations 2020, they will benefit from section 82 so long as they can show a firm intention to return to the premises once lawfully able to do so.

 

Second, section 82 applies to head tenancies, provided that some part of the building is occupied for business purposes.  This means that even holders of head lessee who may not themselves occupy the building for business purposes will have protection against a superior landlord seeking to forfeit their lease if, for example, a head lessee cannot pay rent because it has not received any from its under tenants.

 

It is however unlikely to catch other types of tenancy, for example tenancies with a term of less than 6 months including farm business tenancies, tenancies relating to electronic communications apparatus, tenancies at will and licences.The Act also prevents landlords with existing forfeiture proceedings on foot from recovering possession until after 30 June 2020, by requiring that judges give dates for possession after 30 June 2020.

 

landlords is still legally entitled to take payment from a rent deposit to cover any unpaid rent ,add interest to unpaid rent in accordance with any interest provisions in the lease.Seek to bring debt claims against the tenant and/or any guarantor for unpaid rent.

Exercise Commercial Rent Arrears Recovery; and serve a statutory demand and proceed with insolvency action.

 

What happens after 30 June 2020 will depend on what the government decides to do in terms of the restrictions on trade and movement.Currently, when the protected period ends landlords will be entitled to recover any unpaid rent including any interest.

 

The landlord will also be free to forfeit any lease if payment is not made.However, if the government decides that the lock down has not been sufficient, they may consider extending the protected period so as to ensure that business tenants remain protected.

 

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