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Limits to Landlord’s Powers to Evict Business Tenants

The Coronavirus Act 2020 came into force on 26 March 2020 and has increased the protection available to business tenants during the corona crisis. These will apply to tenants of commercial premises such as shops, restaurants, gyms or offices which have a lease under Part 2 of the Landlord and Tenant Act 1954.

No right to forfeit until 30 June 2020

Most leases allow the landlord to peaceably enter the business premises and to take back possession from a tenant who has not paid their rent. Now a tenant cannot have their lease legally forfeited by the landlord during the ‘relevant period’ which ends on 30 June 2020. The government have the power to extend this date further if the current pandemic continues.

In summary this means:

  • Any action in forfeiting the lease will not be enforceable during this period. In the eyes of the Courts, any forfeiture action will be as if it never happened.
  • There is no requirement for the tenant to prove that the non-payment of rent is related to the corona crisis. Even businesses doing well benefit from this relief.
  • The landlord does need to take any active steps to preserve their right to forfeit after this period has ended. They will not have ‘waived’ their right to forfeit by not taking any action to remove the tenant.

Rent that accrues during the relevant period will still be due to the landlord, it is simply the right to forfeit that is taken away.

What happens to existing possession claims?

This legislation impacts on existing cases, even where possession was being sought before the Covid-19 outbreak and the non-payment of rent was completely unrelated.

Where Court proceedings have been commenced but not decided, the date when possession of the property will be given cannot be before the end of the relevant period. The earliest date for possession is currently 30 June 2020 but it could be extended further.

In High Court cases where the tenant must comply with some condition such as paying rent arrears before 30 June 2020, the tenant can apply to extend the date for compliance to the end of the relevant period.

For County Court cases where a date for possession has already been provided and that date is before 30 June 2020, it will automatically be extended to the end of the relevant period.

What can landlords do to recover rent?

The best advice is to try to arrange a payment plan with a struggling tenant. Many businesses will have been forced to close as a result of the lockdown and will have no income.

In situations where a tenant has money to pay rent but is using the forfeiture suspension to take advantage, a landlord might want to take action.

A Statutory Demand could be validly served if the amount owing is more than £750 for an individual or £5000 for a company. This would pressure the tenant to pay or else face the prospect of insolvency. In practice, it might be difficult to list the bankruptcy or winding up hearing during the relevant period but the risk to the tenant is very real.

Another route would be to issue a Court Claim closely followed by an urgent Application for Summary Judgment. A landlord would argue that the tenant had no reasonable prospects of success and could get a Judgment for the arrears. The unsuccessful tenant would risk having a CCJ attached to their name.

It is understandable that the government’s priority has been to protect businesses but forfeiture would have been a bold measure for a landlord to take during the corona crisis. It is unlikely that there would have been a queue of businesses lining up to take over the forfeited premises.

 

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