Further changes to legislation for commercial property landlords and tenants
Abi Lutey, Partner and Head of Commercial Disputes at Coodes Solicitors outlines updates to the Coronavirus Act legislation affecting commercial property landlords.
In my previous blog I explained the effect of Section 82 of the Coronavirus Act 2020 on tenants and landlords of commercial leases. Essentially that piece of legislation introduced a moratorium against forfeiture claims for non-payment of rent during the ‘relevant period’ up to 30 June 2020. This moratorium temporarily delayed any action a commercial property landlord can take against a business tenant that does not keep up with rent payments.
We anticipate that date will be extended beyond 30 June, particularly in light of the Government’s recent announcement that the hospitality sector would not be opening for business until at least July.
There have been a number of further legislative changes since that moratorium was introduced on 26 March 2020.
1. Suspension of possession claims
On 27 March, the Government put a freeze on all current possession claims up to 30 June. If a possession claim is successful, a possession order is put in place which entitles a landlord to evict a tenant and regain possession of the property. The suspension on possession claims was later amended again to exclude claims against trespassers.
2. Further protection for business tenants
On 23 April, Business Secretary Alok Sharma announced that there would also be a moratorium in place until 30 June 2020 imposed on landlords issuing statutory demands and winding up petitions against commercial tenants. This is due to be included in the Corporate Insolvency and Governance Bill, which is yet to be presented.
3. Amendment to the CRAR process
On 24 April 2020 the Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 came into force. The amendment changed the Commercial Rent Arrears Recovery (CRAR) process. Introduced in 2014 to formalise a common law right that has existed for around 800 years, CRAR enables a landlord to recover arrears of rent from a tenant without having to go to court.
Prior to 24 April, a landlord could use the CRAR process when rent became unpaid for seven days. The amendment has extended that to 90 days, giving tenants further assistance during Covid-19 perhaps when they are unable to open and trade.
Our advice to our commercial landlord and tenant clients remains the same at this time: work together to reach a mutually acceptable solution if you are able to. Any reduction in rent paid, rent holiday or agreement for the non-payment of rent for a certain time should be documented in a side letter setting out what has been agreed between the parties. If the agreement to vary is not evidenced in writing, a tenant may argue that a landlord is prevented from enforcing the lease.