The economic impact of the COVID-19 pandemic is causing uncertainty amongst many businesses, with growing concerns over cash flow. In particular, businesses will be worried about their liability to pay rents in respect of their premises – and the possible consequences of finding themselves unable to meet that liability.
Earlier this week, the Government issued a press release detailing their plans to provide some element of relief for tenants of business premises in the Coronavirus Act 2020. This legislation was given Royal Assent on 25 March 2020.
What is the impact of the Act on commercial tenants?
The new Act eases the pressures on commercial tenants in that it suspends a landlord’s ability to exercise its rights of forfeiture and re-entry due to non-payment of rent due after 25 March 2020. This will last until 30 June 2020, with an option for the Government to extend if required.
Who does the Act apply to?
The Act will apply to all tenancies that fall within the definition of business tenancies in the Landlord and Tenant Act 1954. This means that protection will be extended to tenants, sub-tenants and other lawful occupiers who are occupying premises for the purpose of carrying on a business.
The Act also extends its protection to intermediary landlords who have sub-let or permitted a lawful occupier to occupy.
What is the impact on current forfeiture proceedings?
In the case of ongoing forfeiture proceedings, no tenants will be evicted until the expiry of the operative period of the suspension.
Does this amount to a waiver of the right of forfeiture?
No. The ability to exercise the right of forfeiture is simply delayed until the expiry of the Relevant Period.
Does the obligation to pay rent remain?
Yes. In the event of non-payment of rent, the landlord still has alternative remedies available, such as a debt claim and a claim for interest. If you are a landlord who has not been paid, speak to our team about the options available to you.
Will failure to pay rent be treated as a ground for opposing a new lease?
In short, no. The Act says that landlords are to disregard any non-payment of rent during the operative period of the suspension when considering the grounds for opposing a lease renewal under the Landlord and Tenant Act 1954.
With usual quarter day rent payments falling on 25 March, tenants of business premises have already begun to request delays in rent payment, and will no doubt continue to do so over the coming days and weeks. Discussions between landlords and tenants to agree on a structure for rental payments could be crucial in maintaining both parties Businesses. In the meantime, the new Act gives commercial tenants some much-needed comfort.
For more information please contact a member of our Commercial Property Team
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