Commercial Tenants & Rent Arrears – Coronavirus Act 2020

The most commonly used remedy to recover rent is to forfeit the lease either by peaceable re-entry or by court proceedings.

Both the High Court and the County Court have jurisdiction to grant relief from forfeiture for non-payment of rent on terms as to payment of rent and costs. Most applications will be made in the County Court because the CPR provide that only in exceptional cases should proceedings be brought in the High Court.

In the case of forfeiture by action, relief is automatic if the arrears of rent and costs are paid within the timescale ordered by the Court (not less than 4 weeks from the first hearing (S138 County Courts Act 1984). Relief is discretionary if forfeiture is effected by peaceable re-entry (S139 CCA 1984).

The Coronavirus Act 2020 received Royal Assent on 25 March 2020 and and applies (insofar as relevant to this note) from 26th March 2020

Section 82 ideals with forfeiture against commercial tenants in arrears with rent. The Act applies to relevant business tenancies which are defined as tenancies to which Part 2 of the Landlord and Tenant Act 1954 applies (premises occupied for the purpose of business); or would apply if a relevant occupier were the tenant. Relevant occupier is defined as being a person other than the tenant who lawfully occupies the premises or part of them.

The Act that provides that for the relevant period – namely from 26 March 2020 until 30 June 2020:

• A right of re-entry or forfeiture for non-payment of rent may not be enforced by action or otherwise.
• Nothing that the landlord does is to be treated as waiving a right of re-entry or forfeiture.
• Any proceedings commenced in the High Court before 26 March in which an order is made during the relevant period must ensure that the tenant does not have to give possession to the landlord before 1st July 2020. This includes orders which the tenant applies to vary before possession is given to the landlord.
• Similarly the County Court must not make any order requiring the tenant to give up possession before the end of the relevant period.
• Any order made with a period expiring within the relevant period is treated as being extended so that it expires at the end of the relevant period.

The effect of the Act therefore is:

1. To prevent any action (whether by court proceedings or peaceable re-entry) to forfeit a commercial lease until 30 June 2020
2. To prevent any order being made in existing proceedings which require the tenant to give possession to the landlord before 1st July 2020
3. To extend the time period within which tenants must pay the rent and costs or give up possession until 1st July 2020.

The Act provides that the Government may extend the relevant period beyond 30 June 2020 by statutory instrument.

Tenants should be aware, however, that any unpaid rent remains payable despite the provisions of the Act and the Act does not apply to other remedies open to a landlord such as distraint, court proceedings, insolvency proceedings or claiming from a guarantor or former tenant.

If you have any queries relating to the above article please contact Jonathan Cue, Senior Civil Clerk on 020 7353 0711 or via email.