30th March, 2020
Moratorium on the rental Monopoly
The UK Government has temporarily suspended the right of commercial landlords to take forfeiture action against business tenants in England and Wales.
This means that business tenants who cannot currently pay their rent (because of cash-flow issues cause by the Coronavirus pandemic) will be protected from forfeiture.
The suspension comes as one of the many changes under the new Coronavirus Act 2020 which came into force on 26 March 2020. No business tenant can be forced from their premises if they miss a payment in next three (3) months (provisionally ending on 30 June 2020). This ‘time-out’ period can be extended by the government.
In addition, no action by a landlord (except for an expressly written waiver) will be regarded as waiving a right of re-entry or forfeiture for non-payment of rent. Effectively, freezing the parties positions until the pandemic has passed.
Business tenants will still remain responsible for their rental payments after the suspension period. The Government’s aim is to “support ongoing conversations between landlords and tenants about voluntary arrangements”. The Government “recognises businesses struggling with their cashflow due to coronavirus remain worried about eviction”.
Most commercial lettings don’t allow the tenant to withhold, offset or deduct rent under any circumstance. Usually, if the rent is not paid in time (as normal) the landlord will be able to take their property back by peaceful re-entry or commencing forfeiture proceedings.
Standard lease arrangements do not include ‘force majeure’ (superior force or acts of god) clauses. These clauses are usually found in development agreements or construction contracts and allow parties to terminate, pause or review their agreement obligations when circumstances beyond their control occur making the deal impossible, illegal, inadvisable and commercially unviable. Business tenants, prevented from using their let property, could argue that their lease agreement has been ‘frustrated’. Frustration is very hard to substantiate. There are little or no reported cases in England where a lease has been held to be frustrated.
Landlords and business tenants concerned about their situation should contact their agents and/or solicitor about their rights/obligations and what practical steps can be taken.
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