Protection for Business Tenants during Coronavirus Pandemic

The Coronavirus Act 2020, an emergency piece of legislation drafted in only a matter of days, achieved Royal Assent earlier this week, meaning it is now law.

Amongst many other things, this wide-reaching Act of Parliament tries to give business tenants some protection at this unprecedented time by:

• postponing landlords’ abilities to exercise rights of re-entry (or forfeiture) for non-payment of rent until 30 June 2020, subject to extension by the Government (“relevant period”);
• preventing any court orders being made that require a tenant to give possession prior to expiry of the relevant period under pre-existing forfeiture proceedings on the grounds of non-payment of rent; and
• confirming that landlords cannot rely on non-payment of rent during the relevant period as a ground to oppose a lease renewal request from the tenant in the future.

For the purposes of the above, “rent” includes not just the annual rent but any sums payable under a lease (including, for example, service charge and insurance rent).

Although these measures will be welcomed by tenants in the immediate midst of the pandemic, it should be noted that:

• the legislation doesn’t remove tenants’ obligations and/or relax other landlords’ rights in respect of any breach of them (such as to charge interest on late payments, pursue any guarantor, drawdown from a rent deposit held, issue debt proceedings and/or to seek to forfeit on the grounds of insolvency and/or another breach e.g. of the repair covenant), so tenants cannot simply view this as a ‘free pass’ to disregard their leasehold obligations entirely!;
• unless a landlord expressly waives their right to forfeit in writing (which is very unlikely), the Act only postpones landlords’ rights to forfeit on the grounds of non-payment of rent until after the expiry of the relevant period (rather than waiving it altogether) so, once the relevant period has expired, tenants will still need to pay all of the rent they should have paid during this time (including any interest payable under the lease) or their landlord could seek to forfeit on this basis thereafter; and
• while these protections apply to most business tenancies, there are some exclusions, so any tenants seeking to rely on these exemptions should take advice to check they are protected first.

If you are a business tenant concerned about your ability to comply with your obligations under your lease or a landlord whose tenant is in breach of its lease, please contact either Alex Smith or Amy Rose  at Endeavour Partnership on for advice on your legal position.

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