The Coronavirus Act 2020: How does it protect business tenants?
The Coronavirus Act 2020, which is now in force, has introduced key measures providing protection to business tenants who may be struggling due to the outbreak of coronavirus.
The key points for commercial landlords and tenants to be aware of are as follows.
A right of re-entry or forfeiture
The Coronavirus Act 2020 prohibits commercial landlords from re-entering or forfeiting commercial leases for non-payment of rent from 26 March 2020 until 30 June 2020. Note that the Government has the power to review and extend this period if necessary.
Who qualifies as a Tenant?
The measures will apply to all tenants under commercial leases which fall under the definition of a business lease within Part 2 of the Landlord & Tenant Act 1954. This includes tenants on contracted-out leases.
How is “rent” defined?
Rent includes any sum a tenant is liable to pay under the lease. This will therefore include sums due such as service charges and insurance rent.
What is the impact on ongoing forfeiture proceedings?
The Coronavirus Act 2020 also postpones any forfeiture proceedings currently going through the courts. Initially proceedings will be postponed until after 30 June 2020, but again the Government has the ability to review and extend the period.
Do landlords need to be concerned about waiving the right to forfeit?
No, during this period landlords will not have waived their right of forfeiture for non-payment of rent by tenants unless they give an express waiver in writing. The right to forfeit is simply postponed until 30 June 2020 (or later if extended).
When the relevant period ends, the tenant will be required to pay all of the rent due from the previous quarter in order to avoid forfeiture.
What about other breaches of the lease?
The Coronavirus Act 2020 only applies to rent arrears and the right to forfeit in relation to other breaches of the lease are not covered. As such, a landlord can give notice and potentially forfeit the lease if the tenant is in breach of other covenants, such as any permitted use covenant under the lease.
For further information, please contact Janice Young or Holly Baker