The Coronavirus Act 2020 (the “Act”) has set out in more detail some of the policies which the Government indicated would be brought forward in the early days of the current crisis. They provide clarity for landlords and tenants of both commercial and residential properties.
With Business Tenancies, the landlord’s right to forfeit a lease for non-payment of rent can’t be enforced before the 30 June 2020. That includes forfeiture via court proceedings and retaking possession via bailiffs.
However, in an attempt to protect landlords, the legislation (Section 82 of the Act) goes on to state that no conduct by a landlord (apart from an express waiver in writing) is to be regarded as waiving a right of forfeiture for non-payment of rent. This means that if a landlord makes attempts to recover the unpaid rent for arrears, which accrued in the three months leading up to 30 June 2020, they will still be entitled to forfeit based on that non-payment of rent after 30 June 2020. This is also based on the assumption that the Government does not extend this period by further legislation. This contrasts with the usual situation where any attempt to recover the unpaid rent once it has fallen due prevents the landlord from seeking to terminate the tenancy for that particular non-payment.
It is also important to note that this only relates to forfeiture for the non-payment of rent and does not prevent a landlord from forfeiting for other breaches of the tenancy, eg: a failure to insure or a failure to keep the building in good repair. It is, however, worthy of note that a Section 146 Notice under the Law of Property Act 1925 must be served before relying on any other breach of the tenancy and that the Courts are likely to take into account the current crisis in assessing what is a “reasonable period of notice” to remedy such a breach.
Further to this, It is also important to note that a landlord can still seek to recover unpaid rent from a tenant via Court proceedings. However, the government has announced that they will restrict the use of the Commercial Rent Arrears Recovery process and Statutory Demands for unpaid rent during this period.
Practice Direction 51Z which came into force on 27 March 2020 has imposed a general 90 day stay on new and current possession proceedings. It means that any claims against residential tenants, or any claims concerning mortgage repossession claims, are stayed (or suspended) for a period of 90 days.
This is particularly frustrating for landlords who may find themselves pursuing tenants who fell into arrears well before the crisis took hold but are now prevented from evicting them for at least three months.
Again, this restriction does not prevent a landlord from suing a tenant for unpaid rent, but whilst the restriction on evicting tenants remains, the position of a landlord will inevitably worsen.
These restrictions do not apply to lodgers and those occupying holiday lets or indeed possession claims against some trespassers. If you are in any doubt as to whether the occupier of land is a trespasser you should seek your professional advice.
Whilst the Government’s approach is intended to protect tenants at this difficult time, there is a risk that their strategy has simply transferred the potential financial loss to the landlord.
Current regulations have been imposed with a view to maintain and protect tenants during the current crisis. Whilst it is unlikely that this solution will be sustainable in the longer term, landlords and tenants will need to work together in the interim to ensure that tenants can remain in situ whilst landlords are paid what they are owed under the tenancies. This may require the parties to agree to a payment plan.
It is important to note that these proposals do not relieve the tenant of the obligation to pay the rent during this period – they simply restrict the remedies open to landlords in the event of non-payment