New Protective Measures for UK Business Tenants

On 25 March 2020, emergency legislation in the form of the Coronavirus Act 2020 (“the Act”) was given royal assent. The Act covers a broad range of measures taken by HM Government in relation to a broad range of topics as businesses and the general public are impacted by the coronavirus, COVID-19.

No enforcement of re-entry or forfeiture for non-payment of rent for businesses

Under section 82 of the Act, a right of re-entry or forfeiture, under a ‘Relevant Business Tenancy,’ for non-payment of rent may not be enforced, by action or otherwise, during the ‘Relevant Period.’ This covers any sum a tenant is liable to pay under a relevant business tenancy.

The Relevant Period is currently the period from 26 March 2020 until 30 June 2020. The Relevant Period may be extended to such later date as may be specified by the relevant national authority in regulations made by statutory instrument, and that power may be exercised on more than one occasion so as to further extend the Relevant Period.

The wide definition of Relevant Business Tenancy in the Act means that business tenancies to which Part 2 of the Landlord and Tenant Act 1954 applies will be covered by the protective measures contained in section 82 of the Act. This may also cover situations where the parties have contracted out of the security of tenure available under the Landlord and Tenant Act 1954.

Furthermore, in accordance with the Act, any order made by the High Court during the Relevant Period to the effect that possession of the property comprised in the Relevant Business Tenancy is to be given to the landlord must ensure that the tenant does not have to give possession of the property to the landlord before the end of the Relevant Period.

Certain circumstances are not covered by section 82, including licenses to occupy, tenancy at will, and certain tenancies expressly excluded from Part 2 of the Landlord and Tenant Act 1954 (e.g. tenancies of less than six months).

The initial announcement by HM Government related to protective measures for business tenants who would be unable to afford their respective rents. However, section 82 of the Act contains no provisions requiring that rent cannot be afforded by the business tenant. Rather, it simply states that “[a] right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent, may not be enforced, by action or otherwise, during the relevant period.” Accordingly, it would seem that businesses that can afford to pay their rents may make use of the protection during the Relevant Period.

During the Relevant Period, no conduct by or on behalf of a landlord, other than giving an express waiver in writing, is to be regarded as waiving a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent. However, it should be noted that section 82 of the Act protects against enforcement of re-entry or forfeiture for non-payment of rent. It does not result in business tenants receiving a rent-free period and rent for the Relevant Period will need to be paid by the business tenant at some point.

Similarly, a landlord’s other remedies are not affected by section 82. This means, for example, that the landlord can take rent from any deposit, exercise Commercial Rent Arrears Recovery (CRAR), which allows landlords to seize a tenant’s goods from the premises in order to recover unpaid rent, claim interest on rents due, and/or begin an insolvency process against the tenant by serving a statutory demand. Although frozen court proceedings due to the COVID-19 outbreak would likely make these difficult forms of recourse.  However, a tenant should take into consideration all these remedies before a decision is made to stop paying rent.

Northern Ireland and Scotland

A comparable provision for Northern Ireland is found in Section 83 of the Act.

In Scotland, the Coronavirus (Scotland) Act 2020 (ScotCoVAct) has come into force on 7 April 2020 and focusses primarily on residential tenancies rather than commercial tenancies. Furthermore, the protective measures for business tenants contained in section 82 of the Act do not apply in Scotland. However, the ScotCoVAct extends the period before eviction under commercial leases can take place to 14 weeks (previously 14 days) and applies irrespective of whether a notice has already been served (provided the 14-day period has not already expired) and irrespective of whether the circumstance which would entitle the landlord to terminate the lease that already exists.

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Should you have any questions about the topics covered in this article or need assistance, please email John Nimmo, Edward Sloan, Max Scharbert, Dawn Robertson, Grant Docherty, Scott Nelson or get in touch with your usual Rooney Nimmo contact.

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This Article Is One Of A Series Intended To De-Mystify Common Legal Issues For The Non-Lawyer And Entrepreneur Audience – They Are Designed To Foster Discussion And Is By No Means Exhaustive. These Materials Are For Informational Purposes Only. Nothing Herein Is Intended Nor Should Be Regarded As Legal Advice. The Distribution Of This Article To Any Person Does Not Establish An Attorney-Client Relationship With Our Firm. Rooney Nimmo Assumes No Liability In Connection With The Use Of This Publication. This Bulletin Is Considered Attorney Advertising Under The Applicable Rules Of New York State. Rooney Nimmo UK Is Regulated By The Law Society Of Scotland And Rooney Nimmo US By The New York Rules Of Professional Conduct. All Attorneys And Solicitors Listed In This Firm Stipulate Their Jurisdictional Limitations. Rooney Nimmo In The USA Is A Law Firm Registered As A New York State Professional Corporation.

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