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Government announces moratorium on Coronavirus-related commercial forfeiture

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24/03/2020

Along with other unprecedented measures to protect the public and the economy, the UK government announced on 23 March 2020 that commercial landlords are to be precluded from forfeiting commercial leases [1] and evicting the tenant for non-payment of rent. This measure is in place until 30 June 2020 and will be reviewed thereafter.

These measures form part of the emergency Coronavirus bill which is currently progressing through the Parliamentary process. The full bill can be accessed by clicking here.

For these purposes the relevant section is Section 82 of the bill. The full implications of the bill are being digested but the bill is expressed to apply to a ‘relevant business tenancy’ and precludes the landlord from effecting a right of re-entry or forfeiture for the non-payment of “rent” for the “relevant period”. These terms are defined as follows:

Relevant Business Tenancy

  • A tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies, or
  • A tenancy to which that Part of that Act would apply if any relevant occupier were the tenant.

Rent

Includes any sum a tenant is liable to pay under any relevant business tenancy.

Relevant Period

“relevant period” means the period— (a) beginning with the day after the day on which this Act is passed, and (b) ending with 30 June 2020 or such later date as may be specified by the relevant national authority in regulations made by statutory instrument (and that power may be exercised on more than one occasion so as to further extend the period);

In the case of an applicable tenancy, the moratorium extends not only to the unpaid principal yearly rent but to any sums payable under the lease. In these circumstances, the landlord would be precluded from effecting re-entry or forfeiture for any sums owed by the tenant until at least 30 June 2020. There had been some suggestion that the moratorium would only apply in circumstances where the tenant could not pay as a result of coronavirus but there is no such qualification – it applies across the board.

The definition of relevant tenancy may give rise to arguments about certain classes of commercial tenancy or occupation not falling within the moratorium. So for example it appears the following are not caught by the moratorium :

  • Licences including serviced office accommodation;
  • Tenancies at will;
  • Mining leases, a tenancy of an agricultural holding, a tenancy granted in consequence of employment, a tenancy not exceeding 6 months and a home business tenancy all of which are specifically excluded from the 1954 Act;
  • Code Agreements under the Electronic Communications Code 2017 and where Part 2 of the Landlord and Tenant Act 1954 does not apply.

and the following are arguably not caught by the moratorium :

  • Tenancies where the tenant (or a group company) is not in business occupation and the occupier is in occupation or possession without landlord’s consent i.e. is in occupation unlawfully.
  • Tenancies where the tenant is holding over under the Landlord and Tenant Act 1954 but where it is no longer as a matter of fact in business occupation. Although if the tenant is not in business occupation as a result of the Government’s orders and outside of the tenant’s control then so long as the tenant continues to assert his right to occupy then it will still likely to be caught by the moratorium.

The rent will continue to accrue together with interest and there is provision that no step taken by a landlord will waive the breach for non-payment of rent, save for an express waiver in writing. So in theory and in the absence of any further extension of the relevant period, the landlord’s entitlement to forfeit will be immediately restored at the end of the relevant period.

The moratorium on commercial forfeiture does not apply to breaches of other tenant covenants and arguably will not extend to the requirement to pay unliquidated amounts such as damages for dilapidations.

Neither does it seem to prohibit Commercial Rent Arrears Recovery [2] or the issue of a winding-up petition or other insolvency action.

Finally the bill contains provisions dealing with the recovery of possession in relation to ongoing possession proceedings for non-payment of rent and which provides that the possession date is to be no earlier than the expiry of the relevant period.

Walker Morris will continue to monitor and advise on the progress of the Coronavirus Bill, and on options for landlords and tenants as matters develop.

 

[1] See our briefing on the basics of forfeiture for further information about this landlord’s remedy

[2] See our recent briefing for information and practical advice on CRAR

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