The Coronavirus Act 2020 ("the Act") has now received Royal Assent, and is in force. This brings into action several key points that affect both commercial and residential property.
Commercial Property
Prohibition on forfeiture
The Act prohibits landlords from forfeiting
commercial leases for non-payment of rent (by peaceable re-entry or court
proceedings) from now, until 30 June 2020.
It does not extend to forfeiture for other grounds. The Act reserves parliament the right to extend
that date in the future and only time will tell if that additional time is
needed.
These restrictions cover both business
tenancies under Part II of the Landlord and Tenant Act 1954 (regardless of
whether they have been excluded from sections 24 to 28) and more widely other
interests which at this time we are interpreting to include sub-tenants,
tenants at will and licensees.
This lifeline will help many commercial tenants with their sudden loss of cash flow, so that they can temporarily pause paying rent without the risk of forfeiture between now and 30 June 2020. There is no obligation placed on a tenant who takes this decision to show that their decision was caused by the Covid-19 pandemic. However tenants must remember that their arrears are not written off by the legislation and they will need to come to an arrangement with their landlords to repay those sums when the protective period is over. And, if a mutually acceptable arrangement cannot be found forfeiture may be the landlord's preferred option at some point in the future.
No Waiver
The Act encourages communication between the
parties, and protects Landlords so that they can engage with their tenants
without being deemed to have waived the right to forfeit. A landlord or agent electing to do so should
ensure any agreement is reached prior to 30 June 2020, in order to avoid
waiving the right to forfeit for sums that have become due.
Ongoing Proceedings
In cases where a landlord has already issued a
claim for possession on the basis of non-payment of rent the Court cannot now
grant an order which allows for possession prior to 30 June 2020.
If an order has already been made in the High
Court giving the landlord possession at an earlier date then the tenant can
apply to have this date extended to a date no earlier than 30 June 2020. In
such circumstances "the High Court must ensure that the tenant does not
have to give possession of the property to the landlord before the end of the
relevant period (30 June 2020)".
If an order has already been made in the County
Court giving the landlord possession at an earlier date then the date mentioned
shall now be treated as if it stated 30 June 2020.
Future Opposed Renewals
If a commercial landlord wishes to oppose a renewal of a business lease in the future then they will not be able to rely on any failure to pay rent during this period as grounds for doing so.
Residential Property
Under the Act, from today until 30 September
2020 (unless changed) all notice periods are extended to three months. This
applies to both Section 8 Notices and Section 21 Notices. The longer notice
periods do not apply to existing claims which have already been issued.
Prior to commencement of the Act, there had
been speculation in the press that new possession claims based on rent arrears would
be stayed altogether. Whilst this has not happened, and whilst trespasser claims
remain unaffected by the new legislation, we anticipate that the Act and the
general climate will influence the Court's behaviour in relation to such
proceedings. In practice, judges may be cautious about making orders which
could have an impact on public health. Where there are vulnerable individuals
or minors occupying a property, it will be even more difficult for receivers to
achieve an order for vacant possession. Further, where receivers do manage to
obtain a possession order pursuant to Section 21, we expect judges to exercise
their discretionary power, to extend the order for up to six weeks, much more often.
In addition, there is the ongoing practical impact of social distancing on possession hearings. The challenges posed by social distancing are heightened for possession hearings due to the practice of bulk listing such claims, often at 10 am. Prior to the Act passing, courts had already begun vacating possession hearings and re-listing these for dates in June. We anticipate the courts will continue to re-list hearings and that there will be inevitable delays in obtaining orders.
