COVID-19: Government Update for Renters and Landlords

Under the Coronavirus Act 2020 (CA 2020), the Government has introduced a moratorium on forfeiture for non-payment of rent.

Most modern tenancies include a provision permitting a landlord to terminate (or forfeit) the tenancy, if the tenant fails to pay the rent within the terms set out in the tenancy. (It is very important to note that different rules apply to any tenancy with a residential element and, if you are the landlord of any such premises, you should seek advice before taking any steps to terminate the tenancy).

Ordinarily, a commercial landlord whose tenant has not paid the rent in time, can exercise their right to forfeit the tenancy, either by retaking possession themselves or by commencing proceedings in the Court for an Order for possession.

In an attempt to protect commercial tenants, the Government has introduced a moratorium on this right to forfeit for non-payment of rent. This includes forfeiting via Court proceedings or by retaking physical possession of the premises (i.e. changing the locks).

The Government has given some further guidance on what the Act is intended to achieve. It is important to note that this is only guidance and is not definitive legal advice, but it does give a clear indication of what the Act is intended to achieve.

Under the CA 2020, rent is defined as any sum a tenant is liable to pay under a relevant business tenancy. That includes things, such as VAT, service charge and insurance premiums. Effectively, the intention of the Act is to stop a landlord forfeiting for failure to pay any monies due to the landlord. This includes those other charges not just what might be termed pure rent.

It is important to note that this moratorium is intended to cover all commercial tenancies, including those which have been contracted out of the Landlord & Tenant Act 1954.

It is important to note that the legislation is not intended to create a rent holiday for a tenant. They are still obliged to pay the rent for the period of the moratorium and indeed other enforcement options, including a county court debt action or use of the Commercial Rent Arrears recovery (CRAR) process, are still permitted, although the Government have made clear that they will monitor the enforcement of non-payment and may bring forward further legislation, if they consider this to be a problem.

In reality, over the course of the next few months many commercial landlords are likely to seek agreements with their tenants to maintain rent payments in the short-term or agree to payment plans, perhaps accepting regular monthly payments rather than insisting upon quarterly payments.

For the time being, however, a landlord must not seek to forfeit a commercial tenancy for non-payment of rent or any other sums due under the tenancy.

Please note, all advice and opinion offered in this article are subject to change in line with the latest government advice.