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Coronavirus Act 2020: safeguards against forfeiture for commercial tenants in England and Wales affected by national emergency

Having rushed through both Houses and received Royal Assent on 25 March 2020, the Coronavirus Act 2020 (http://www.legislation.gov.uk/ukpga/2020/7/contents/enacted/data.htm) has now introduced important temporary restrictions on the abilities of landlords of commercial premises to recover possession during these extraordinary times.

The measures introduced are unaltered from the Bill on which this note was originally based.

Business tenancies: prospective protection from forfeiture

Section 82(1) provides, bluntly, “a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent, may not be enforced, by action or otherwise, during the relevant period.”

A “relevant business tenancy” means a tenancy to which Part 2 of the 1954 Act applies; or a tenancy to which that part of the 1954 Act would apply if any relevant occupier (being a person other than the tenant who lawfully occupies the premises which are, or which form part of, the property comprised in the tenancy) were the tenant.

Note such a tenancy is covered even if it is contracted out of the security of tenure provisions in Part 2 of the 1954 Act.

The “relevant period” runs from the day after the Act enters into law – i.e. from today, 26 March 2020 – until 30 June 2020 (subject to extension).

Business tenancies: restrictions on forfeiture applicable to existing proceedings

The Act also goes further, and makes provision in relation to existing proceedings too (i.e. proceedings commenced before the Act entered into law).

In any existing proceedings in the High Court seeking to forfeit a “relevant business tenancy” for rent arrears, the High Court may not during the “relevant period” order that possession be given before the end of the “relevant period”.

Further, where the High Court has already made an order for possession, but one giving the tenant relief on unless terms, if the tenant applies to vary the order then the High Court must, in dealing with the application, ensure that the tenant does not have to give possession before the end of the “relevant period”. So where, for example, possession is to be given unless arrears are cleared within a certain time frame, the tenant may seek a guaranteed lifeline from the court. 

As for proceedings currently pending in the County Court, similar provision is made.

Under section 138(3) County Courts Act 1984, where the court is satisfied the landlord is entitled to enforce its right of re-entry and the tenant has not paid the arrears and the landlord’s costs not less than 5 days before the hearing, the court must order possession to be given at the expiration of a period not less than 4 weeks from the date of the order – subject to the tenant’s automatic right of relief on payment of the costs and the arrears before expiry of the period ordered.

The Act now precludes the court from specifying any period that expires before the end of the last day of the “relevant period”.

Further, any order for possession made before or during the relevant specifying a period for possession to be given which would expire during the relevant period (for example because the relevant period is extended) is automatically treated as having been extended so as to expire at the end of the relevant period.

“Rent” defined for these purposes

Although the restrictions are limited to forfeiture on the basis of “non-payment of rent”, note that “rent” is broadly defined to include “any sum a tenant is liable to pay under a relevant business tenancy”.

No waiver save by express waiver in writing

The Bill also provides that during the relevant period no conduct by or on behalf of a landlord short of an express waiver in writing is to be regarded as waiving a right to forfeit for non-payment of rent (as defined). 

Ground B, interrupted

Finally, it is also provided that for the purposes of determining whether the landlord has made out Ground s.30(1)(B) in any proceedings in relation to a relevant business tenancy, any failure to pay rent under the tenancy during the “relevant period” is to be disregarded. Tenants will therefore not be penalised for a failure to pay rent during the crisis (seemingly without having to establish a causal link between any failure to pay rent and the crisis). This provision may have significance lasting far beyond the end of the “relevant period”.

Is that all there is?

The measures contained in section 82 of the Act may provide some short-term comfort in these difficult times. However, it is notable that the Act restricts only one remedy open to landlords in respect of non-payment of rent, leaving all other enforcement options on the table. Tenants experiencing dramatic decline in footfall and business will still need to find the means to pay the rent eventually.

Compiled by James Tipler.

The information on this webpage is for the purposes of information and discussion only and is not to be relied on as legal advice.

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