The Impact of Coronavirus on Commercial and Residential Leases

PUBLISHED 08.02.21

 

The recently assented Coronavirus Act 2020 (“CA”), which came into force on the 26th March 2020, affords extra protection to tenants of both residential and commercial leases under Sections 81 and 82 CA respectively.

Under the S.82 CA, landlords are now prohibited from forfeiting a lease where the tenant falls into rent arrears during the ‘relevant period. The relevant period commenced on the 26th March 2020 with a current end date of the 31st March 2021. If a tenant fails to keep up with rent during the relevant period, the landlord will have no choice other than to allow the lease to continue running until the relevant period ceases. In addition, the landlord’s right of re-entry is also revoked during the relevant period.

In absence of any express written waiver, any conduct or inaction on the landlord’s behalf will not prejudice their position. Furthermore, their inaction against a tenant for breach of the lease shall not be construed as the landlord accepting the tenant’s position, thereby waiving their future right to forfeit the lease and re-enter the property. In effect, once the relevant period is over, the landlord may then seek to commence action against the tenant for failure to pay rent during the relevant period.

The other tool at a landlord’s disposal when dealing with the issue of non-payment of rent, the process of Commercial Rent Arrears Recovery (“CRAR”), has also been limited in scope as a result of the Covid-19 pandemic.

The Taking Control of Goods (Amendment)(Coronavirus) Regulations 2020 came into force on the 29th September 2020 and its assent restricts the CRAR process in aid of the tenant. The Regulations state that if notice is served from the 25th December 2020 onwards, the tenant must have been in arrears of rent for a minimum of 366 days.

In addition to the above protective measures afforded to tenants, the Government has also published the Code of Practice for commercial property relationships during the COVID-19 pandemic. Amongst other things, one important takeaway from the Code of Practice is that landlords and tenants are encouraged to seek a mutual agreement as to what amounts can be paid, taking into account the other principles of the Code of Conduct.  Whilst the Code is not mandatory, in most cases, it will likely be prudent to at least consider whether the Code should be followed, where a tenant is in arrears of rent.

The bottom line message to this is that landlords should take extra precautions and thoughtfully consider their position prior to taking action against tenants, in light of the recent legislative changes. A watchful eye should be kept on further developments that will no doubt arise in the near future.

If you would like to speak to someone about your rights as either a landlord or tenant, contact our Dispute Resolution team on:

Exeter 01392 285000    Cullompton 01884 33818     Newton Abbot 01626 330127