One of the key headlines for any property litigator to emerge over the last few weeks was the Government’s announcement on 23rd March 2020 that there would be ‘extra protection for businesses with a ban on evictions for commercial tenants who miss rent payments’.
The Coronavirus Bill 2020 had its first reading on 19th March 2020 and six days later the Coronavirus Act 2020 received Royal Assent, coming into force nearly in its entirety the same day. It has made considerable changes to many aspects of daily life but there is one section that has particular relevance to commercial tenancies. Section 82 looks at the forfeiture rights of commercial landlords for non-payment of rent.
The Government’s announcement (in its press release on 23 March 2020) stated:
Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction, the government has announced. … These measures, included in the emergency Coronavirus Bill currently going through Parliament, will mean no business will be forced out of their premises if they miss a payment in the next 3 months.
Section 82 provides that the right of re-entry or forfeiture may not be enforced under a relevant business tenancy for non-payment during the relevant period.
Crucially that needs to be unpacked into its component parts. What is a relevant business tenancy, what qualifies as rent and what is the relevant period?
Relevant Business Tenancy means a tenancy to which Part 2 of the LTA1954 applies, or a tenancy to which Part 2 would apply if a relevant occupier is the tenant. Therefore it applies to any tenancy where the premises are occupied by the tenant for business purposes including contracted out tenancies. If you can’t run your business from the premises due to coronavirus, but would do so otherwise, the fact that the business is not currently operational doesn’t exclude s.82 from applying. There will be arguments where the tenant has furloughed its employees or has made them redundant due to closure of the business through lack of demand though.
Rent includes ‘any sums a tenant is liable to pay under a relevant business tenancy’ and therefore covers all purely financial obligations including services charges, interest, administration fees, repairs and so on. It is essential to understand however that s.82 only applies to a breach for failure to pay rent. It does not provide a blanket cover for any other breach. A landlord may well be able to point to other breaches which would provide grounds for forfeiture, although in the circumstances it is likely that a court would have sympathy with any tenant being forced out of premises where it is considered that the Landlord is taking advantage of the coronavirus-induced situation. Furthermore, should there be rent arrears which have accrued over some months previously, the Landlord is now barred under this section from taking enforcement proceedings for the next three months, even though the breach commenced prior to the ‘relevant period’.
The Relevant period has been defined as being between 26th March 2020 and 30th June 2020 inclusive. This is a preliminary period of time and there remains the opportunity for this to be extended by the regulations.
Bear in mind though that this section has very limited application and protection for the tenant. Firstly, the tenant remains liable for the rent; this is NOT a rent-free period. Secondly, the tenant is being provided with only a short window of three months and when that period ends the Landlord will be able to forfeit the lease for non-payment of all accrued arrears; this is not a long-term relief. Thirdly, the Landlord remains entitled to pursue the insolvency route against a non-paying tenant.
It is easy to see why businesses felt reassured that forfeiture in respect of non-payment of rent accruing in the next three months would be prohibited altogether, this is not the case; it’s simply been delayed. The threat of eviction remains if a tenant misses a rent payment, its simply the case that the Landlord cannot instigate proceedings until 1st July 2020. How different will things look then?
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