COVID-19: Ban on forfeiture of commercial leases for non-payment of rent

Commercial landlords and tenants will both be affected by the Coronavirus Act 2020, which bans the forfeiture of commercial leases for non-payment of rent

30 March 2020

25 March 2020 was the day on which many commercial tenants became liable for a quarter of their annual rent and was also the day on which the Coronavirus Act 2020 ('the Act') came into force.

Section 82 of the Act will be of particular interest to commercial landlords and tenants, in England and Wales, as it bans the forfeiture of commercial leases from 25 March 2020 until 30 June 2020 (or longer if the government deems it necessary) for non-payment of rent.

As ever, the devil is in the detail and it will be interesting to see how certain parts of section 82 will be interpreted and applied by the courts in due course. However, at this stage, key points to note include:

  • the ban relates only to forfeiture for non-payment of rent and not any other breaches of the lease;
  • ‘rent’ includes any sum a commercial tenant is liable to pay under its lease;
  • liability for rent is not affected, merely the remedy of forfeiture that would ordinarily be available to the landlord;
  • leases that are under 6 months in length, tenancies at will and other interests that would normally fall outside the provisions of Part 2 of the Landlord and Tenant Act 1954 ('the 1954 Act') will not be covered by the ban;
  • leases that would ordinarily benefit from the security of the tenure provisions in the 1954 Act, but which have been ‘contracted out’, will be covered by the ban;
  • the landlord still has recourse to the other usual remedies, e.g. CRAR, the issue of a debt claim, and service of a statutory demand;
  • during the ban on forfeiture, landlords will be unable to waive the right to forfeit the lease, except expressly in writing; and
  • ongoing forfeiture proceedings in the Courts will also be caught by the ban.

While the issue of a debt claim and service of a statutory demand are still options, most court proceedings are likely to be delayed due to the COVID-19 pandemic. The Companies Court in particular has, from 23 March 2020, adjourned all winding-up petitions for a minimum of three months.

The Act contains a similar ban in respect of commercial tenancies in Northern Ireland and it is expected that Scottish law will also follow suit in due course.

If you are a commercial landlord, or a tenant, and have any queries as to how these new laws will affect you, please contact Chris Preston or James Sutherland.

Key contact

Chris Preston

Chris Preston Partner

  • Real Estate Disputes
  • Real Estate
  • Retail

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