THE PANDEMIC – WHAT CAN A COMMERCIAL LANDLORD DO (AND NOT DO)
The pandemic has had a noticeable and substantial effect on businesses, many of whom have suffered a drastic cut in their income. Many businesses are tenants of commercial property, so their ability to pay rent has also been affected. In an effort to protect commercial tenants, the Coronavirus Act 2020 was passed to restrict the actions a landlord is able to take against their tenant.
Current restrictions for a commercial landlord
Forfeit for non-payment of commercial rent
Section 82 of The Coronavirus Act 2020 provides protection to business tenants by preventing landlords from exercising their rights of re-entry or forfeiture for non-payment of rent or any sums due under the tenancy until at least 30 June 2021. It is important to note that no conduct by a landlord or on their behalf will be regarded as waiving a right of re-entry or forfeiture for non-payment of rent unless the landlord has given an express waiver in writing. Despite this, caution is recommended should a landlord wish to reserve the right to forfeit at a future date.
Taking control of goods
The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 prevent a landlord from using Commercial Rent Arrears Recovery unless the amount of rent due is 457 days and will increase to 554 days on 24 June 2021. These restrictions will remain in place until at least 30 June 2021.
A further restriction in place is that there is a general prohibition on the presentation of a winding-up petition based on an unsatisfied statutory demand served between 01 March 2020 and 31 March 2021. Such a restriction is likely to be extended.
Options available to a commercial landlord
Despite the restrictions that are in place, a commercial landlord still has several options open to them when dealing with a tenant.
Commercial rent due
A tenant is still liable for rent in accordance with the tenancy unless there has been a prior agreement. Where rent remains unpaid, a landlord may be able to claim interest on this sum together with the costs of seeking to recover any sums owing.
Drawdown of rent deposits
A landlord is able to draw down from a rent deposit if the terms of the deed allow. However, the government’s code of practice suggests that such a drawdown is on the understanding that a tenant will not be required to top-up the deposit before it is realistic to do so.
Debt proceedings for rent arrears
A landlord is not restricted from issuing claims seeking recovery of rent arrears from a tenant. Where there is no right to set off, it will be very difficult for a tenant to defend a claim for rent arrears and as such a landlord may seek summary judgment.
Forfeiture of a commercial lease
Although a landlord cannot forfeit a commercial lease for non-payment of rent until at least 30 June 2021, the landlord is not prevented from enforcing a right of re-entry for breach of other covenant. That being said, a landlord would be wise to take into account a tenant's ability to remedy a breach and the reasonable period of time for remedying such a breach during the pandemic.
If you would like advice on a commercial lease or tenant issue, then please call us on 0800 8494101 and speak to a member of our Property Litigation Team.
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