Business tenancies protection from forfeiture: no enforcement against business tenants until the end of March 2021
Our experts look at how the Government's rules have extended protection for commercial tenants until March 2021.
The Government has announced that commercial tenants will continue to be protected from the risk of eviction until the end of March 2021.
A moratorium on business evictions due to non-payment of rent was introduced at the start of the pandemic with the aim to provide greater security to commercial tenants, protect vital jobs and to reduce the risk of closure to businesses worst affected by the pandemic. This new announcement will mean that business tenants have received protection from the threat of eviction for one year.
The restriction on the landlord’s ability to forfeit a commercial lease for non-payment of rent began on 26 March 2020 and was due to end on 30 June 2020, but it was further extended to 30 September 2020 and then, subsequently, to 31 December 2020.
In its announcement, the Government stated that the protections will be further extended until March 2021 and that this will be the final extension. It said that the extension “will give landlords and tenants 3 months to come to an agreement on unpaid rent.” It further expressed that where commercial tenants are able to pay some, or all, of their rent, they should do so and landlords and tenants are encouraged to reach agreement wherever possible.
The Communities Secretary Robert Jenrick said: “I am extending protections from the threat of eviction for businesses unable to pay their rent until March 2021, taking the length of these measures to one year. This will help them recover from the impact of the pandemic and plan for the future. This support is for the businesses struggling the most during the pandemic, such as those in hospitality – however, those that are able to pay their rent should do so. We are witnessing a profound adjustment in commercial property. It is critical that landlords and tenants across the country use the coming months to reach agreements on rent wherever possible and enable viable businesses to continue to operate.”
The moratorium on commercial forfeiture applies to breaches for non-payment of rent only. It does not apply to breaches of other tenant covenants.
On what legal basis?
The Coronavirus Act 2020 (‘CVA’) came into force on 26 March 2020 as an emergency measure. Section 82 of the CVA contains the following express restrictions in relation to ‘relevant business tenancies’:
- A right of re-entry or forfeiture for non-payment of rent may not be enforced, by action or otherwise (section 82(1)).
- No conduct by or on behalf of a landlord is to be regarded as waiving a right of re-entry or forfeiture for non-payment of rent, unless the landlord gives an express waiver in writing (section 82(2)).
- If High Court proceedings have already commenced to enforce a right of re-entry or forfeiture for non-payment of rent, any possession order must ensure that the tenant does not have to give possession before the end of the Relevant Period (section 82(4)).
- Where the High Court has already made an order for possession to enforce a right of re-entry or forfeiture for non-payment of rent which requires possession to be given during the Relevant Period unless the tenant complies with some requirement (for example to clear the arrears by a certain date), the tenant can apply to vary the order and if it does so the High Court must ensure that the tenant does not have to give possession before the end of the Relevant Period (section 82(5) and (6)).
- If County Court proceedings have already commenced to enforce a right of re-entry or forfeiture for non-payment of rent, any possession order made under section 138(3) of the County Courts Act 1984 (CCA 1984) must not specify a date for possession that is before the end of the Relevant Period (section 82(8)).
- Where the County Court has already made an order for possession to enforce a right of re-entry or forfeiture for non-payment of rent which requires possession to be given during the Relevant Period, the date for possession will be treated as having been extended under section 138(4) of the CCA 1984 so that it expires at the end of the Relevant Period (section 82(10)).
A ‘relevant business tenancy’ is defined as a tenancy to which Part II of the Landlord and Tenant Act 1954 (LTA 1954) applies.
The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No 3) Regulations 2020 (SI 2020/1472) and the Business Tenancies (Extension of Protection from Forfeiture etc.) (Wales) (Coronavirus) (No 3) Regulations 2020 (SI 2020/960) were published to extend the ‘relevant period’ to the end of March 2021.
The restrictions on commercial landlords recovering unpaid rent by the exercise of commercial rent arrears recovery (CRAR) will also be extended in line with the moratorium.
It was also announced that a review of commercial landlord and tenant legislation “to address concerns that the current framework does not reflect the current economic conditions” will be undertaken in early 2021 and this will include a review of Part II of the Landlord & Tenant Act 1954, different models of payment of rent and the impact of the pandemic on the market.
Insolvency measures restricting statutory demands and winding up petitions will also be extended until the end of March 2021.
For further information, links to the press release and regulations are set out below: