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30 March 2020

A 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 prevents a landlord from terminating certain business tenancies by forfeiture for non-payment of rent until 30 June 2020. There are powers within the Act for this date to be extended.

The restriction applies 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 intends these also to apply to leases where the protection of the 1954 Act has been excluded. The provisions seek to cover lawful subtenants also.

Do the restrictions apply just to unpaid rent or to other payments under the lease?

The restrictions apply to the failure to settle any sum payable under the relevant business tenancy including rent, 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?

Not at present. The Act states that the landlord’s conduct during the relevant period (currently due to end on 30 June 2020) will not be treated as waiving the right to forfeit for the non-payment of rent unless the landlord gives an express waiver of the right to forfeit in writing (which is unlikely). In effect, the landlord’s right to forfeit for unpaid rent is “frozen” until 1 July 2020.

What about existing forfeiture proceedings?

Courts will now not be able to make a possession order which requires a tenant to give possession of business premises to the landlord before 1 July 2020. Indeed, a new CPR Practice Direction introduced on 27 March 2020 has made it clear that any proceedings seeking to enforce an order for possession by a warrant or writ of possession are now stayed for 90 days, as are all new claims for possession brought under CPR Part 55.  

In this fast moving 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.

Following a further government announcement on 19 June, the restrictions detailed below are being extended until 30 September.  A detailed update is to follow.

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