Coronavirus Act 2020 and forfeiture of leases
22 June 2020
The government is racing to try to protect tenants’ interests, with the Coronavirus Act 2020 coming into force on 26 March.
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 and has now been extended until 30 September 2020, 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 30 September 2020) 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
- 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.
- In addition to the moratorium on forfeiture, the Act also prevents landlords (until at least 30 September 2020) from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 189 days or more of unpaid rent.
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. Where a tenant has withheld payment of the March and/or June 2020 quarter’s 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 in September 2020.
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.
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