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31 March 2020

Coronavirus: Government ban on forfeiture commercial property

A number of businesses especially in the retail and leisure industries have been forced to close as the government introduces stringent social distancing measures to curtail the spread of Covid-19. This has left a lot of businesses who rent their premises wondering how to pay the rent and commercial landlords worried that their tenants can’t afford to pay the rent.

The government has introduced some protections for commercial tenants in the form of Section 82 of the Coronavirus Bill 2020, which received Royal Consent on 25th March 2020. This legislation assists commercial property tenants in two ways.

Firstly, a commercial landlord is banned from forfeiting a lease for the non-payment of rent until 30th June 2020 (a date which the government can extend if necessary). The ban applies to forfeiture by both peaceful re-entry and by action through the Courts. The legislation also gives a wide definition of what ‘rent’ is and the ban on forfeiture will apply to any payment made under a lease which will include, for example, payments due for service charges and insurance.

But to give the landlords some protection too, the legislation states that any actions taken by a landlord prior to 30th June 2020, will not be deemed a waiver of a landlord’s “right to forfeit” (a right to forfeit is waived if the landlord takes any step which is consistent with the lease continuing) so if a commercial tenant was already in arrears before the coronavirus shutdown, then the landlord is not deemed to waive the right to forfeit for those arrears once the ban on forfeiture has ended.

Secondly, if the lease is a business protected tenancy under Part II, of the Landlord and Tenant Act 1954, then any rent arrears which accrues between 25th March 2020 and 30th June 2020 will be disregarded for the purposes of a landlord opposing a grant of a new lease on the grounds of rent arrears.

Ultimately, commercial landlords and tenants are being encouraged to communicate with each other to discuss the payment of rent and negotiate alternative arrangements. The parties need to work with one another to ascertain which of the government financial measures might be available to assist either the tenant to pay the rent or the landlord to cover any loss of rent. Both parties should also check to see if they are covered under their insurance policy.

If you are a commercial landlord or tenant and you are concerned about how the Coronavirus crisis will affect your lease, then please get in contact with our experienced Property Litigation Team.

Please contact the team via email using disputes@steeleslaw.co.uk or by calling 01603 598000.

*The information provided in this article is designed to provide useful information on the subject, not to provide specific legal advice.

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