Commercial Property: Landlord and Tenant

Commercial Property: Landlord and Tenant

Landlords and Tenants are both likely to experience difficulties faced with the impact of the Coronavirus outbreak.

The Coronavirus Act 2020 came into force on 25 March 2020 and contains some new legislation aimed to protect tenants who have been hit hard financially during the Coronavirus outbreak.

During the “relevant period” which is the period from 25 March 2020 to 30 June 2020 a Landlord is prevented from taking forfeiture proceedings to end a business tenancy or from re-entering a property which is subject to a business tenancy because of non-payment of rent. The Act provides that rent will include insurance rent and service charge. The “relevant period” may be extended by the Government in due course.

During the “relevant period” no conduct by the Landlord other than an express waiver in writing is to be regarded as waiving a right of re-entry or right to forfeit under a business tenancy for non-payment of rent. A Landlord can still re-enter the property or commence forfeiture proceedings for non-payment of rent after the “relevant period”.

The protection against forfeiture and re-entry during the “relevant period” only relates to non-payment of rent. The protection does not extend to forfeiture for beach of other covenants under the business tenancy such as repair or use of the property.

The Act prevents forfeiture for the time being but does not prevent a Landlord from using other recovery methods to include;

  • Rent Deposit- a Landlord can still make withdrawals from a rent deposit in accordance with the conditions of the rent deposit deed.
  • Guarantors- a Landlord can still pursue a Tenant’s guarantor under a lease or authorised guarantee agreement

Debt- a Landlord can still demand rent and bring a claim for a debt or can rely on the Commercial Rent Arrears Recovery (CRAR) procedure.

The rent and any interest payable under the terms of the business tenancy on unpaid rent will still be due and a Tenant will need to pay all rent and other payments after the “relevant period”. A Landlord can commence forfeiture proceedings after the “relevant period” has ended.

It is recommended that any Landlord seeks legal advice before taking any action and discusses with their Tenant any difficulties that are likely to be faced regarding rent payments as soon as possible.

Unless written into a business tenancy a Tenant is not automatically entitled to a rent concession such as a rent-free period or rent reduction however, a Landlord may agree to a rent-free period or reduced rent to assist at this difficult time. Any agreement reached should be put in writing and set out the terms agreed.

A Landlord who has a mortgage on property subject to a business tenancy should contact the bank or mortgage lender to discuss the terms of the mortgage and may be able to agree a mortgage holiday or extended period to repay the mortgage.

If you have any questions relating to a Landlord or Tenant matter please contact in the first instance Allison Bunney ab@charlesfrenchlaw.co.uk 01872 263813