Coronavirus (COVID-19): commercial property landlords and tenants

Section 82 of the Coronavirus Act 2020 prevents landlords from forfeiting ‘relevant business tenancies’ until at least 30 June. However, tenants should think twice before withholding rent and other lease payments; landlords do not just have to adopt a submissive approach.

At the end of March 2020, the government announced measures to protect commercial tenants that cannot pay their rent because of COVID-19, from eviction in the short term. Shortly after the announcement, the Coronavirus Act 2020 (the “Act”) received royal assent and became law.

Section 82 of the Act also includes extensive provisions dealing with situations where forfeiture proceedings have already commenced in the High Court or county court, but this article is only concerned with situations where no such proceedings already exist.

The announcement stated the measures would benefit commercial tenants who cannot afford to pay their rent. However, there is no means test in section 82. Any tenant therefore, even one who has significant financial resources, may take advantage of the new law.

Exclusions

There are a few exclusions from protection under section 82 including:

  • licences to occupy;
  • tenancies at will; and
  • tenancies expressly excluded from Part 2 of the 1954 Act, such as farm business tenancies and tenancies not exceeding six months

‘Rent’

Under s82 ‘rent’ is defined widely to include ‘any sum a tenant is liable to pay under a relevant business tenancy’ and not just rent in the traditional sense or as defined under contract.

Only forfeiture

Tenants (and landlords) should take note that section 82 only protects the tenant from forfeiture for non-payment. It does not create a rent-free period, nor does it remove the landlord’s other remedies or remedies for other breaches of the lease. The rent remains due and will need to be paid at some point.

While the government is clearly keen to encourage collaboration rather than litigation, a hard-pressed landlord would be entitled to:

  • Take payment from a rent deposit
  • Add interest to the debt in accordance with the interest provisions in the lease
  • Sue the tenant and/or any guarantor for the debt
  • Serve a statutory demand

Tenants who are considering relying on section 82 should also be mindful if they are exercising a break clause that requires the rent to be paid up to date in order for the break to be effective.

Relevant period

The relevant period is 26 March 2020 (the day after the day on which the Act was passed) until 30 June 2020.

The Act does however anticipate that the relevant period may need to be extended, possibly multiple times, and provides that extensions can be made by statutory instrument rather than requiring further primary legislation.

The Government guidance on commercial tenant protection from eviction during the Coronavirus pandemic can be found here.

If you are in any doubt about your rights as a business tenant or commercial landlord in the current climate and require legal advice, please do not hesitate to contact the expert property litigation team at Scott Bailey in Lymington, Hampshire.