The “Moratorium” – Summary
The government passed a law (the Coronavirus Act 2020, Section 82) to prevent forfeiture claims being brought against business tenants by their landlords as a result of the current pandemic. From the 26 March 2020 to 30 June 2020 (the “relevant period”), a landlord’s right of re-entry or forfeiture arising from non-payment of rent cannot be enforced. The relevant period is being extended beyond 30 June 2020.
- During the relevant period, a landlord cannot be said to have waived his or her right of re-entry or forfeiture, unless it is done expressly in writing.
- No order for possession can be enforced and any order for possession made during that period must take effect after it ends.
- During the relevant period, businesses affected by the crisis may be unable to pay their rent. Previously, under the Landlord and Tenant Act 1954, landlords could oppose the grant of a new lease protected by that Act by asserting the ground under section 30(1)(b) i.e. that there has been a persistent delay in paying rent which has become due. The Coronavirus Act provides that any failure to pay rent during the relevant period is to be disregarded under the Landlord and Tenant Act 1954.
- Other legal measures have been carried out that may also be important to tenants and landlords. There is also a new code of practice which landlords and tenants are expected to follow.
Extension of Moratorium
- On 16 September the government announced it would extend the suspension on evictions until end 2020. This extension will also apply “to home owners, commercial and leasehold”, and will extend the moratorium until end 2020. See the Civil Procedure Rules, Part 55.29.
- Measures are to be introduced so that the courts can consider appropriate protection of all parties, including vulnerable tenants and those shielding from coronavirus.
- The government has stated that “where tenants do experience financial difficulties as a result of the pandemic, the government is clear that landlords and tenants should work together and exhaust all possible options – such as flexible payment plans which take into account a tenant’s individual circumstances – to ensure cases only end up in court as an absolute last resort.”
- Nevertheless, “the ultimate ambition is to transition out of these measures at the end of August to allow the market to operate while ensuring people have appropriate access to justice.”
- Financial assistance schemes for landlords, tenants and businesses are included in the same announcement.
- The full text can be read here https://www.gov.uk/government/news/ban-on-evictions-extended-by-2-months-to-further-protect-renters
Summary of other Legal Issues:
Commercial Rent Arrears Recovery (CRAR)
- With effect from 25 April 2020 this may be only be exercised where there is at least 90 days of unpaid rent outstanding rather than the usual seven days.
- The Corporate Insolvency and Governance Bill Corporate Insolvency and Governance Bill, (which is not yet in force) will prevent the winding up of a company based on deemed insolvency following the failure to comply with a statutory demand served during a period commencing on 1 March. The end date for the period will probably be 30 September.
- A landlord can still start a debt claim for unpaid rent.
- A landlord can draw down on a rent deposit.
- A landlord can still start a debt claim against a guarantor.
Legal Challenge By Tenant
- You may wish to argue that no rent should be payable for a particular period of time. There may be express or implied terms on rent suspension or frustration in your lease. This area of law is uncertain and if you do wish to raise those types of arguments you should seek independent legal advice.
- Do check to see if you have insurance policies which cover you.
Dispute Resolution and the Code of Practice
- Some landlords may be concerned by publicity or other considerations if they are too forceful in pursuing rent or rent arrears. The Government’s position is that landlords and tenants should make all efforts to resolve these issues, with court proceedings being a last resort. There have been extensive negotiations between the Guardians of the Arches and the Arch Company, and these you know all about. Other railway landlords have also published their own schemes.
- Nevertheless, should you need it, the Government has published a voluntary code of practice for commercial property relationships during the current pandemic. See https://www.gov.uk/government/publications/code-of-practice-for-the-commercial-property-sector/code-of-practice-for-commercial-property-relationships-during-the-covid-19-pandemic
- This code of practice sets out what the government expects both landlords and tenants to do, and how they should behave. Going to court is expected by the government to be the last resort, although there are no clear penalties for failing to follow this recommendation. At the moment it is a voluntary code, but potentially the courts may consider whether the parties have complied with it.
- Can you get business rates relief due to the pandemic?
- The most important thing to read is Expanded Retail Discount 2020/21: Coronavirus Response – Local Authority Guidance: https://www.gov.uk/government/publications/business-rates-retail-discount-guidance
- No change to underlying legislation relating to rates reliefs. There has been an extension of discretionary powers to local authorities to grant relief. This should cover the following types of business. This list is not exhaustive (although it was exhausting to write):
- Shops: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets, charity shops, opticians, post offices, furnishing shops/ display rooms (eg carpet shops, double glazing, garage doors), car/caravan show rooms, second-hand car lots, markets, petrol stations, garden centres, art galleries (where art is for sale/hire).
- Sale of food and/or drink to members of the public: restaurants, cafes, drinking establishments, takeaways, sandwich shops, coffee shops, pubs, bars.
- Live music venues (includes nightclubs and theatres).
- Sport, leisure and other facilities: sports grounds and clubs, museums and art galleries, nightclubs, stately homes and historic houses, theatres, tourist attractions, gyms, wellness centres, spas, massage parlours, casinos, gambling clubs and bingo halls.
- Assembly: public halls, clubhouses, clubs and institutions.
- Providing living accommodation as a business: hotels, guest and boarding houses, holiday homes, caravan parks and sites.
- Properties which have closed due to the governments advice on COVID-19 should be treated as occupied for relief purposes.
Business rates relief under the Expanded Retail Discount (ie “coronavirus relief”) will NOT include:
- Properties NOT considered eligible for relief: financial services, banks, building societies, cash points, bureaux de change, short-term loan providers, medical services *vets, dentists, doctors, osteopaths, chiropractors; professional services (solicitors, accountants, insurance, financial advisors, post offices.
How much is the relief?
- Total relief available is 100% of the bill after other reliefs have been applied.
- Don’t forget you need to apply for this relief and any other ‘ordinary’ reliefs you may be entitled to.
If you’d like to discuss and of these issues please contact Michael Large on firstname.lastname@example.org or 07930 219144.