The Coronavirus Act 2020 was enacted (as an emergency bill) on 25th March 2020.
The Government announced prior to enactment that tenants of commercial properties would be protected from eviction from non-payment of rent. The Press Release from the Government on 23rd March 2020 stated “Commercial tenants who cannot pay their rent because of the coronavirus will be protected from eviction.”
This new legislation provides any right of entry or forfeiture under a commercial tenancy for non-payment of rent will not be enforced by action, or otherwise, during the relevant period. The relevant period is from 26th March to 30th June, or such later date specified.
So what does this mean for commercial landlords and tenants?
Provision of Services: If there is a clause in the Lease regarding an obligation on the Landlord to provide services and the coronavirus makes it impossible to do so, using all reasonable endeavours, the landlord will not be liable for failure to provide these services. A landlord should check the lease to ascertain whether the provision provides exclusions for matters outside of the landlord’s control. Of course, the provision of services should take account of the restrictions for social distancing under the legislation.
Non-Payment of Rent: Most leases will contain provisions which sets out particular circumstances in which the landlord may take steps to, in effect, cancel the lease and seek an order for vacant possession. Usually, the Landlord will be entitled to terminate the Lease and seek an order from the Courts for vacant possession. In accordance with the new legislation, the ability for Commercial Landlords to take forfeiture action for business tenancies has been suspended. This means no business tenant can be forced from their premises if they miss a payment in the next three months. This suspension period can also be extended, and therefore we urge our clients to monitor the situation.
Keep-Open Clauses: Many retail leases may contain a provision for the tenant to trade continuously throughout the duration of the lease. Most commercial leases will contain an obligation to comply with Acts of Parliament. A tenant would be in breach if he fails to comply with an act of parliament, such as keeping the premises open. If a tenant breaches this clause, a landlord could apply to the court for specific performance, but success depends on the legality of the action.
Insurance: Where a tenant pays a contribution towards a landlord’s insurance premium, by way of insurance rent, the policy should be checked to ensure the policy covers a worldwide pandemic. You should check whether this may give rise to a rent suspension. Coronavirus has been added to the list of “notifiable diseases” and therefore the insurance policy may recognise this classification.
Rent Reductions: If a tenant is unable to trade, they may feel it is appropriate to approach the landlord with proposals for rent concessions, i.e reaching voluntary arrangements about rental payments due. A tenant may also request a reduction in the rent. A tenant must consider the fact that there is no duty for the Landlord to grant the tenant’s requests, although it would be in their best interests to do so from a reputational point of view. An agreement such as this should be set out in writing and signed by the parties to reflect the agreement. It should also set out whether the tenant has obtained any assistance from the Government and that the landlord is reimbursed where necessary.
We can help
Our team advise clients to keep up to date with the guidelines issued by the UK Government and World Health Organisation. We would also advise engaging with your landlord or tenant to ascertain whether any concessions could be made during the time.
We understand many of our clients will likely be affected by the Coronavirus COVID-19. Our Commercial Property Team are still working and are on hand to deal with any potential issues which may arise with your business during this time.
Contact our team for support and advice on 03333 580393 or email firstname.lastname@example.org