It goes without saying that the economic consequences of the current coronavirus pandemic mean that many commercial tenants will be unwilling or unable to pay rent.
They may also be unwilling or unable to pay other sums due pursuant to the terms of any relevant lease. This has the potential to cause landlords significant financial detriment, and therefore the non-payment of sums due is not necessarily a matter that can be left in abeyance irrespective of the fact that we are currently living in a time of crisis. So what can commercial landlords do during the pandemic when tenants cannot or will not pay?
Is forfeiture an option?
The introduction of the Coronavirus Act 2020 means that that most commercial landlords are not currently able to pursue the remedy of forfeiture. The relevant provisions of the Act can be summarised as follows:-
· The Act precludes the right of re-entry or forfeiture (peaceably or via proceedings) in relation a relevant business tenancy for the non-payment of rent during the relevant period.
· Rent is defined widely, it includes all sums of money due from the tenant, including service charges, insurance, charges for remedial works etc.
· The relevant period during which forfeiture is precluded runs from 26th March 2020 to 26th June 2020 (“the Relevant Period”), although there is provision for this period to be extended if necessary.
· A relevant business tenancy is one that is subject to Part II of the LTA 1954 (Part II) – for the purposes of the Act, subtenants and licensees are protected as long as they are business occupiers (as the Leasehold estates are merged).
· The Act can potentially be construed to include tenants who do not have security of tenure (have opted out), however this point is likely to be subject to challenge and debate.
· Farming Business Tenancy’s, Agricultural Holdings, Mining Leases and some other types of license and tenancy are not protected; however this would appear to be contrary to the Government’s objective of protecting all commercial tenancies, and therefore these exclusions are likely to be challenged.
· If a Landlord attempts forfeiture contrary to the Act, it will be ineffective and will constitute trespass.
What about possession proceedings?
The introduction of the Coronavirus Act 2020 means that commercial landlords are not currently able to actively pursue possession proceedings. The relevant provisions of the Act can be summarised as follows:-
· Possession proceedings can be issued during the Relevant Period but will be automatically paused; this includes applications by tenants for relief from forfeiture in relation to possession proceedings issued by landlords before the Relevant Period.
· Possession proceedings already in progress are paused for the Relevant Period as noted above.
· The only possession related applications permitted by the Act are as follows: possession claims against trespassers, applications for injunctive relief, Interim Orders and applications for Case Management Directions for ongoing matters (but only if agreed by both parties)
So, what remedies can a commercial landlord pursue during the pandemic?
· Debt recovery proceedings
· Insolvency/winding-up proceedings
· Commercial Rent Arrears Recovery (CRAR)
This is not legal advice; it is intended to provide information of general interest about current legal issues.