Coronavirus Act 2020 and forfeiture of leases

The key features of the legislation are:

• It provides a moratorium on forfeiture of commercial leases for non-payment of rent. However, “rent” is defined to include any amount payable under the lease and, taken literally, this applies to all payments required to be made by the tenant including service charge, insurance payments, utilities and so on.  

• The moratorium applies as from 26 March 2020 and has now been extended until 25 March 2022, or such later date as may be specified. This means that, whilst the moratorium is in place, a landlord will not be able to evict a tenant for non-payment of rent.

• It doesn’t stop the rent still being payable and leaves the tenant open to contractual or other enforcement. 

• Failure by the tenant to pay rent during the moratorium period is removed as a ground of objection by a landlord to a new tenancy under the Landlord and Tenant Act 1954

• Once the legislation has lapsed (currently scheduled for the end of 25 March 2022) a landlord will be able to claim for forfeiture for both payments that became due during the moratorium period, and for any becoming due but unpaid after it ends, though it should be noted that the government has recently announced plans for a binding arbitration scheme to resolve disputes between landlords and commercial tenants once the moratorium has expired, but it remains unclear at present exactly how this scheme will operate.

• The legislation does not apply to a short lease (i.e. a lease for less than six months. Landlords whose tenant is on a lease of 6 months or less can therefore still forfeit their tenant’s lease. 

• Further extensions are also likely to be announced in relation to the existing protection for tenants against Commercial Rent Arrears Recovery (CRAR) that currently provide that:
  • if a notice of enforcement is given, or where goods are taken control of, on or before the 23 June, then 457 days' rent must be in arrears.
  • if a notice of enforcement is given, or where goods are taken control of, on or after 24 June, then 554 day's rent must be in arrears.

Whilst the Coronavirus Act is not a complete silver bullet for tenants looking to manage their cashflow, it should provide some much needed breathing space. Tenants should however be aware that following the expiry of the moratorium period, the right to forfeit will arise again, unless the period is extended further.  Where a tenant has withheld payment of historic rent without its landlord’s consent, it would therefore be well advised to open a dialogue with the landlord before the expiry of the mortarium period.

If you are a tenant contemplating your next steps or a landlord faced with tenants asking about their options, feel free to contact our team at Lewis Silkin for some advice on next steps.