Update: A further stay on business tenancy terminations

The Coronavirus Act 2020 (“the Act”) came into force on 25 March 2020. For landlords and tenants in England and Wales, the Act immediately prevented a landlord from terminating certain business tenancies by forfeiture for non-payment of rent until 30 June 2020. 

The Government has now announced that the moratorium on the forfeiture of business tenancies will be extended until 30 September 2020.  There are powers in the Act for a further extension of this date.

The extension is contained within The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2020 (“the Regulations”) which come into force on 29 June 2020.

The restrictions apply to forfeiture by the landlord instructing a bailiff to change the locks as well as to forfeiture proceedings in the Court.

What tenancies do the restrictions apply to?

The Act states that the restrictions benefit any business tenancy to which Part 2 of the Landlord and Tenant Act 1954 (“the 1954 Act”) applies. The Explanatory Notes accompanying the Act confirm that the Government intended it to also apply to leases where the protection of the 1954 Act is excluded. The provisions also seek to cover lawful subtenants.

Does it apply to rent or other payments under the lease including service charge and insurance?

Yes, the definition of rent extends to any sum payable under the business tenancy including insurance, service charges and interest.

If the landlord enters into discussions with a commercial tenant in relation to the sums owed, could it lose the right to forfeit for non-payment of these sums?

No - The Act states that the landlord’s conduct during the relevant period (originally to expire on 30 June 2020 but now due to end on 30 September 2020) will not be treated as waiving the right to forfeit for non-payment of rent unless the landlord gives an express wavier of the right to forfeit in writing. In effect, the landlord’s right to forfeit for unpaid rent is “frozen” until 1 October 2020. The Act states that the right to forfeit will be preserved for non-payment of rent.

On 19 June 2020, the Government published a voluntary code of practice for commercial property arrears during COVID-19 with the aim of facilitating discussions between landlords and tenants by “communicating best practice and presenting a unified approach”. For more on the code, please see our insight: Government code published for commercial property arrears during COVID-19. If the parties agree a rent concession, whether there will be changes to the landlord’s right to forfeit for non-payment of rent will depend on the precise terms of the rent concession agreement.

What about existing forfeiture proceedings?

Under the Act and the Regulations, Courts will not be able to make a possession order which requires a tenant to give possession of business premises to the landlord before 1 October 2020.  Separately, amendments have been made to the Civil Procedure Rules, the effect of which is to extend the Court stay on possession proceedings and enforcement of orders for possession until 23 August 2020.  Possession claims themselves can still be issued, although there has been a decrease in these since the start of the pandemic.

The restrictions detailed above have been removed. Please refer to our latest guidance in our March 2022 Quarter Day page which can be found here.

In this fast paced period of unprecedented change, if landlords or tenants have any further questions about the operation of the Act and how it may affect them, please do not hesitate to contact Emma Humphreys, Laura Bushaway or your usual Charles Russell Speechlys contact.