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Impact of Coronavirus Act 2020 on Commercial Property Tenants

As a result of emergency measures passed by the government under the Coronavirus Act 2020 during this unprecedented time of crisis there is at least some temporary relief for tenants whose businesses have been shut due to the lockdown.

For a 3-month period ending on 30 June tenants will be protected from eviction by landlords if they are unable to make their rent payments. In general leases rent means not just the main rent payable but also includes service charge and insurance payments.

Ordinarily non-payment of rent for more than 21 days gives the landlord the right to forfeit the lease by taking back possession of the premises. Now tenants can at least feel safe in the knowledge that whilst their businesses are shut for the next few months they will not have the added stress of having to make rent payments.

Tenants should take note that at the moment rent would become payable again in advance monthly/quarterly after 30 June. They should also note that landlords would still have the right to charge interest on unpaid rent and if a rent deposit has been put up as security for the lease there is nothing to stop landlords taking the unpaid rent from the deposit. In theory they could also ask tenants to make up the deficit of the deposit monies once the crisis is over.

As to what happens at the end of June is open to debate but if the government does not extend the period of relief there is another element of comfort for tenants who may be concerned about losing their premises. Whilst landlords can re-enter premises for non- payment of rent (other breaches need a court order) it is possible for tenants to apply for relief from forfeiture. Courts have a fairly wide discretion and have always been reluctant to set down hard and fast rules. The general position is that tenants may apply for relief from forfeiture within 6 months of re-entry taking place. This is likely to require making up the rent deficit and in that case a court could re-instate the lease as if forfeiture had not taken place at all.

As a final thought it looks highly likely that landlords and tenants are both going to have to show flexibility moving forwards. As with recessions in the past landlords will be keen to work with tenants to help them to survive and rent-free periods, rental concessions and delayed rent reviews are likely to become the norm for a good deal of time moving forward. Tenants will also need to be mindful of the financial impact on landlords as well and moving forward not use the current crisis as an excuse to gain advantages where it is not warranted.

If you have any Commercial Real Estate enquiries please call us on 01256 320555 or email pdixon@clarkeandson.co.uk to discuss how we can assist you in your plans.  

Phil Dixon

Head of Commercial Real Estate

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