Following our previous article on this topic, the government has extended the protections available to commercial and residential tenants. This article also outlines the remedies available for landlords.
Section 82 of the Coronavirus Act 2020 (‘the Act’) has been extended to 31 December 2020. The Act prevents any forfeiture, whether by proceedings or peaceable re-entry, for non-payment of any sums due under the lease. The legislation does not waive or defer a tenant’s obligation to pay rent under a commercial lease, only an express waiver will do so.
Despite the restrictions on forfeiture, a landlord may forfeit a lease on any other grounds by way of peaceable re-entry provided that no force is used against anyone in the premises who opposes re-entry and there is no eviction of anyone lawfully residing at the premises.
STAY ON ALL POSSESSION PROCEEDINGS
Initially, Practice Direction 51Z stayed all possession proceedings for 90 days from 21 March until 25 June 2020, except claims against persons unknown. This was further extended to 20 September 2020 and Practice Direction 55C outlines the new requirements for possession proceedings:-
From 20 September 2020 to 28 March 2021, there is no longer an eight week window for an initial hearing on possession claims. Therefore, there is likely to be several delays for these proceedings as the courts deal with their backlog.
It is also important to note that landlords must give at least 6 months’ notice when seeking possession under s.83 of the Housing Act 1985; s.8 and s.21 of the Housing Act 1988; and against tenants with accumulated rent arrears of less than 6 months’ rent. For more information, please see our update on this topic.
Landlords are still prevented from using CRAR and the limit of outstanding arrears has increased to 336 days’ rent (previously 276 days’). This restriction also now applies until 25 December 2020. For these purposes, rent only includes the charge for use, occupation and interest, service charge and insurance premiums are not included.
Where a tenant sub-let its premise, CRAR permits the superior landlord to serve a notice under s.81 of the Tribunal, Courts and Enforcement Act 2007 on the subtenant. This will mean that the subtenant pays its rent directly to the superior landlord for arrears directly owed by the immediate tenant. If the subtenant fails to pay the arrears, the superior landlord can exercise CRAR and other remedies in so far as they are not permitted by the coronavirus restrictions.
The government has also extended The Corporate Insolvency and Governance Act 2020 (“the CIGA”), the key provisions include:-
THE CODE OF PRACTICE
The Code of Practice for Landlords and Tenants of Commercial Property (“the Code”) is expected to remain in place until June 2021. Whilst it is voluntary, the Code is intended to support landlords and tenants to negotiate affordable rental agreements.
OTHER REMEDIES FOR LANDLORDS
In light of the above options available for landlords, tenants are encouraged to pay rent and any other sums due under the lease wherever possible. In most leases, where rent and any other sums are unpaid, interest accrues on the unpaid sums at a specified interest rate. If tenants are not able to pay the arrears, they should seek a financial arrangement with their landlords as soon as possible.
Nick Marshall, Director and Sona Shah, Trainee Solicitor