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Coronavirus – Relief for Commercial Tenants?

In what are unprecedented and uncertain times for us all, the government has included in the Coronavirus Act 2020, which received Royal Assent on 25 March 2020, a provision that offers some relief to commercial tenants of commercial leases in England, Wales and Northern Ireland unable to pay their rent during these difficult times. 

Many tenants may find themselves unable to pay their rent as a result of having to cease trading due to the Covoid-19 crisis.  Most commercial leases contain a provision allowing a landlord to forfeit a lease for non-payment of rent if rent has not been paid for a period of 14 or 21 days after falling due. As a result, tenants could find themselves at significant risk of losing their tenancies as a result of circumstances outside their control.

To help businesses, Section 82 of the Coronavirus Act suspends landlords right to forfeit for non-payment of rent between 26 March 2020 and 30 June 2020 although this period may be extended by further legislation if necessary.  Accordingly, commercial tenants will be protected from eviction during this period.  This is not a rental holiday however and tenants will remain liable for the rent that falls due under the terms of the Lease. In essence, this offers tenants some “breathing space” if a business is in difficulty as a result of the current crisis and where it affects their ability to pay their rent.

A landlord cannot either pursue forfeiture proceedings against a tenant who has accrued significant arrears prior to the Covoid-19 crisis during the relevant period.  If forfeiture proceedings have been issued prior to the commencement of the relevant period, it would appear that they can be progressed by the Court, however Section 82 provides that in those proceedings, if the Court decides to make an Order for Possession, that Order cannot take effect on a date within the relevant period i.e. before 30 June 2020, or such extended date.

Although this provision offers relief and assistance to tenants it is not a complete answer for businesses struggling with cash-flow.  One question that landlords will want answered is this- if a COVID-19 defence is raised in proceedings, how can it be established that a tenant could not pay the rent due to the effect of the virus?  We foresee the Section 82 provision being raised by both tenants and landlords in future litigation once this crisis has ended. We will continue to monitor the position and are available to offer guidance to both commercial landlords and tenants.

Should you require any advice on your situation you can speak to our Property Litigation Director – Jason Williams, on 01792 776794 or at [email protected]