Coronavirus Act 2020 – What does it mean to Commercial Landlords & Tenants?

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Coronavirus Act 2020 – What does it mean to Commercial Landlords & Tenants?

March 30th, 2020, Legal Updates, News
Property Finance

The Coronavirus Act 2020 brings into law some changes to the Landlord & Tenant legislation, and in particular the ability of a landlord to seek possession of both Commercial & Residential Premises.

These provisions will remain effective until at least 30 June 2020 for commercial Premises and 30 September 2020 for Residential Premises (“the Relevant Period”), but could be extended if the current situation does not improve.

The main points of this new legislation for Commercial Premises:
  1. A landlord cannot forfeit a lease or exercise a right of re-entry.
  2. A landlord will not waive a right to forfeit unless he does so expressly in writing.
  3. In any proceedings that have already been issued, the courts will not make an order requiring a tenant to give up possession before the end of the Relevant Period.
  4. When determining whether a landlord has made out the ground of persistent delay in paying rent, to oppose the grant of a new lease, the failure to pay rent during the Relevant Period will be disregarded.

In short, Commercial Tenants who are unable to pay rent because of Coronavirus will be protected from eviction, meaning no businesses will be forced out of their premises if they fail to pay rent over the next three months.

Please note, however, that this is simply a deferment and the rent will still have to be paid at some point.

With many tenants facing imminent rent payments, early dialogue and agreeing some form of arrangement between the Landlord and Tenant can often be the best solution.

Things to consider:
  • Landlords could agree that their Tenants pay rent on a monthly basis as opposed to the traditional quarterly arrangement. This would assist Tenants with cash flow issues and ensure that if a debt accrues due to lack of payment, it is minimised.
  • If Tenants cannot pay their rent in full, proposals could be made for a reduced payment. This again minimises the potential losses and takes pressure off of the Tenant to a degree and provides landlords with some cashflow. Please do note the balance will need to be paid later.
  • An agreement could be reached for partial payment of rent and partial Deposit deduction for the balance on a monthly/quarterly basis. However, the reduced Deposit will need to be replenished at some point.

It is important that any arrangements, are documented very carefully. It is also imperative that any arrangements between the Landlord and their Tenant:

  • does not vary the lease or rent deposit deed;
  • are in place for a specific and set period of time;
  • can be terminated at any time by the Landlord;
  • are made as a concession due to Covid-19 and nothing else.

Depending on the business, Tenants should, of course, consider available Government support for businesses such as:

  • cash grants
  • business rates exemptions
  • interest free loans
  • VAT deferral and
  • 80% funding of salaries for furloughed employees up to £2,500.

If you have any questions or unsure about your situation, whether you are a landlord or a commercial tenant, please contact Michael Shapiro directly on [email protected] or 0207 822 2236.

2020 GSC Solicitors LLP. All rights reserved.  GSC grants permission for the browsing of this material and for the printing of one copy per person for personal reference. GSC’s written permission must be obtained for any other use of this material. This publication has been prepared only as a guide to provide readers with general information on recent legal developments. It is not formal legal advice and should not be relied on for any purpose. You should not act or refrain from acting based on the information contained in this document without obtaining specific formal advice from suitably qualified advisors.

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