The Coronavirus Bill - what it means for landlords and tenants (part 2)

This is the second article in our brief series on the Coronavirus Bill. This piece of legislation received Royal Assent on 25 March 2020 and became the Coronavirus Act 2020 (“the Act”). In our first article (found here) we looked at the effect of this legislation on residential tenancies. In this article we look at the effect on commercial tenancies.

Commercial tenancies

Section 82 of the Act is simple. It provides that a landlord may not forfeit a commercial lease (a business tenancy under Part II of the Landlord and Tenant Act 1954) for non-payment of rent during “the relevant period”. It also provides that a landlord will not be treated as having waived any right to forfeit during the relevant period unless it gives an express waiver in writing. The relevant period is presently set to expire on 30 June 2020 but it is quite possible (and provided for in the Act) that the period will be extended.

In respect of existing proceedings (in either the High Court or the County Court), such claims are allowed to continue but the court is precluded from making an order requiring the tenant to give up possession before the end of the relevant period.

Comment  

Commercial tenants will rightly find some comfort in section 82. The breathing space afforded by the Act will mean that landlords do not (at least for the time being) have the advantage of being able to re-enter the premises. This will be of some benefit, particularly against landlords who re-enter and forfeit without court proceedings (peaceable re-entry).

Furthermore, whilst the Act permits existing claims to continue, this must be read in conjunction with Practice Direction 51Z of the Civil Procedure Rules, which came into force on 27 March 2020. This provides that any proceedings under Part 55 of the Civil Procedure Rules (i.e. relating to possession claims) are stayed, or adjourned, for 90 days from (and including) 27 March 2020. (You can see our separate update on this here.) Any existing actions cannot therefore be advanced until June 2020.

However, section 82 does not insulate tenants completely against forfeiture. Landlords are permitted to forfeit for breaches other than non-payment of rent. Depending on how the lease is drafted, this could still be problematic. For example, an insolvency event (including the simple service of a statutory demand ) may be a trigger for forfeiture. Accordingly, whilst a landlord cannot forfeit for non-payment of rent, it could, in theory, begin taking insolvency steps which may then in turn entitle it to forfeit on insolvency grounds. If the relevant period is extended, this route offers landlords an alternative avenue for keeping pressure on their tenants.

Commercial tenants will also need to note that the Act does not otherwise interfere with contractual rights. The rent is still due, and if it is not paid, it is open to the landlord to make a money claim in court or take insolvency proceedings.