Call now: 0208 866 6464
Existing clients tel: 0208 866 6464

The Sethi Partnership Solicitors

The Barn House, 38 Meadow Way,
Eastcote, Ruislip, Middlesex
England, HA4 8TB

info@sethi.co.uk

Call now: 0208 866 6464
Existing clients tel: 0208 866 6464

The Sethi Partnership Solicitors

The Barn House, 38 Meadow Way,
Eastcote, Ruislip, Middlesex
England, HA4 8TB

info@sethi.co.uk

Coronavirus: Briefing for Commercial Landlords

In this briefing, we answer 10 important questions for commercial landlords during the current Coronavirus Crisis.

Get in touch with us today on 0208 866 6464 or fill out our online enquiry form

The Government has introduced a moratorium on the use of any right of re-entry or forfeiture for non-payment of rent by action or otherwise in the case of commercial leases from 26 March until 30 June 2020 (“relevant period”). The new law is contained in Section 82 of the Coronavirus Act 2020 (“2020 Act”) which can be found at https://www.legislation.gov.uk/ukpga/2020/7/section/82/enacted

 

In addition to Section 82 of 2020 Act the Civil Procedure Rules (“CPR”) have been changed (“PD51Z”) to decree that all proceedings for possession brought under CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed until 25 June 2020. Existing possession proceedings are automatically stayed until 25 June 2020, without the need for a court order. If you try to commence new possession proceedings they will probably be stayed on issue until 25 June 2020. You wont be able to enforce an existing possession order by execution of a writ or warrant until 25 June 2020. The Section 82 moratorium only applies to “relevant business tenancies”, which means a business tenancy under Part 2 of the Landlord and Tenant Act 1954 (“1954 Act”).

 

It should be noted that the moratorium will apply to any short lease which contains a right to renew beyond six months or if the combined duration of any prior occupation by the tenant and the lease term exceeds 12 months. The moratorium ends on 30 June 2020 unless it is extended by Statutory Instrument. The moratorium does not change your tenant’s legal obligation to pay you rent due under your lease or tenancy. It should be noted that for the purpose of the moratorium “rent” means any “rent arrears”. It includes any sum which the tenant is liable to pay under a relevant business tenancy, such as service charges, insurance rent and any other payments due. This means that during the “relevant period” in the case of a “relevant business tenancy”:-

  • you cannot forfeit a lease for non-payment of rent by changing the locks nor can you start a claim in court seeking forfeiture of the lease for non-payment of rent
  • if you have an existing order for possession which has not been executed before 26 March 2020 you cannot enforce it until after 30 June 2020
  • if you started forfeiture proceedings before 26 March 2020 and they come before the court in the “relevant period” the court must ensure that a tenant is not required to give possession before the end of the “relevant period”
  • if a tenant applies to vary a possession order which was made prior to or during the relevant period the court must ensure that the tenant does not have to give possession of the property before the end of the relevant period
  • if at a later date the court is deciding whether to refuse a new lease under the 1954 Act on the ground of “persistent delay in paying rent which has become due”, it must disregard any failure to pay rent during the relevant period and
  • nothing you do as a landlord will be regarded as “waiving” your right to forfeit or re-enter for non-payment of rent.

 

 

Yes, but only where the tenancy is not a “relevant business tenancy”. You can change the locks for non-payment of rent during the “relevant period” if your lease contains a re-entry clause, the rent is in arrears for the period stated in the re-entry clause and if the lease is not a relevant business tenancy but it is either:-

  • a short lease, namely one which is for no more than six months
  • a tenancy relating to electronic communications apparatus
  • a tenancy at will

Yes, but only where the tenancy is not a “relevant business tenancy”. You can start court proceedings during the “relevant period” if your lease contains a re-entry clause and if the lease is not a relevant business tenancy but it is either:

  • a short lease, namely one which is for no more than six months
  • a farm business tenancy
  • a tenancy relating to electronic communications apparatus
  • a tenancy at will
  • a lease

If you have let someone in as a licencee (as opposed to a tenant) then you will be able to bring possession proceedings once you have given the licencee the notice stipulated in the licence or if no period is stated by giving reasonable notice which is usually 28 days or one month. Please bear in mind that you will need to pay a court fee of £355 to start a possession claim. You must start the claim in the right court for the area in which the Property is located and bear in mind that some of the court are not staffed at present, so contact the court before issuing any claim to make sure it will be processed. If you issue proceedings before 25 June 2020 they will probably be stayed until that date, which means nothing more will happen until after that date. It is likely that there will be a backlog of cases after 25 June 2020 and much will depend on whether the Government extends Section 82 or the Courts extend PD51Z.

If the term of the lease or tenancy has expired (called “effluxion of time”) you will be able to seek possession of the Property from the court. If your tenant is breach of some other (non- rent) covenant in the lease then you will be able to pursue forfeiture by serving a Section 146 Notice on them. This could be in relation to failure to carry out repairs, unlawful use unlawful assignment or subletting. Please bear in mind that you will need to pay a court fee of £355 to start a possession claim. You must start the claim in the right court for the area in which the Property is located and bear in mind that some of the court are not staffed at present, so contact the court before issuing any claim to make sure it will be processed.

 

If you issue proceedings before 25 June 2020 they will probably be stayed until that date, which means nothing more will happen until after that date. It is likely that there will be a backlog of cases after 25 June 2020 and much will depend on whether the Government extends Section 82 or the Courts extend PD51Z

 

 

That depends on why the court has ordered possession.

 

If the forfeiture arose from non-payment of rent then you cannot enforce the order for possession before 30 June 2020. If the forfeiture arose from some other breach of covenant contained in the lease then you will be able to enforce the order for possession, but not before 25 June 2020 due to PD51Z. This could be in relation to failure to repair, unlawful use, unlawful assignment or subletting. It could also be that your lease or tenancy has expired and the court has made an order for possession by reason of “effluxion of time”.

 

Don’t forget that notwithstanding PD51Z, the tenant could apply to the court for a stay of execution in the normal way. This could take some time to be heard and could be used by the tenant to get more time in the premises. The tenant will remain liable for mesne profits until they give back possession of the Property. Mesne profits means compensation from the tenant paid to you for use of the Property by them from the date of the possession order until they give it back to you.

Yes, there are a number of steps you can take against your tenant which could result in any arrears of rent being paid. However, some of these steps are expensive and time-consuming and can be drawn out by the tenant if they want to delay matters. Ultimately if the tenant does not want to pay you or has not got the money to pay you or is on the verge of bankruptcy or liquidation, then you may have to write off some or all of the rent arrears and wait to get the Property back. You can take the following steps:-

  • If it suits you, try to reach an agreement with your tenant which takes account of their financial circumstances and set in place a payment plan for any rent arrears
  • Inspect the Property in accordance with your rights under the Lease or tenancy upon giving proper notice to the tenant
  • Trigger a Rent Review
  • Send a Letter of Claim demanding payment of the arrears, other sums due and interest at the rate stated in your lease and give the tenant 14 days to pay
  • If the tenant does not pay within 14 days of your Letter of Claim, use Money Claims Online to issue a claim for the arrears, other sums due and interest as well as legal costs
  • If your tenant is an individual and you obtain a judgment against them this will affect their credit rating if they don’t satisfy any judgment within 31 days
  • Use a Rent Deposit, but you need to ensure you comply with the terms of any Rent Deposit Deed
  • Use Commercial Rent Arrears Recovery (CRAR) which is a statutory procedure which allows landlords of commercial premises to recover rent arrears by taking control of the tenant's goods and selling them
  • Serve a Statutory Demand on your tenant if the amount of overall debt is at least £5,000 – that is the first step towards bankruptcy/liquidation and may trigger a response from the tenant seeking to reach agreement with you

Yes. You can take the same steps against a Guarantor as you might take against a tenant and as described in Question 6 above. You need to ensure that you comply with the terms of any Guarantee.

If the tenant becomes adjudicated bankrupt or goes into liquidation, then a Trustee in Bankruptcy, a Liquidator or the Official Receiver (“office-holder”) will be appointed to manage the process. In that process leases are normally “disclaimed” which means the Property comes back to you. The disclaimer process will be triggered by the officer-holder. You should be able to apply to the Land Registry to have any title for the Lease closed, so that you can relet the Property. The tenant could also apply for an Individual/Company Voluntary Arrangement to avoid going into bankruptcy/liquidation. If the tenant is an individual they could seek a Debt Relief Order (“DRO”) if their debts are no more than £20,000 which is similar to bankruptcy. If the tenant gets one:

  • You cannot recover any arrears of rent without the court’s permission and
  • The tenant is usually freed (‘discharged’) from their debts after 12 months and
  • The DRO remains on their credit record for 6 years.

You would need to serve a Section 146 Notice on your tenant in order to embark on any forfeiture process. However if you are unsure as to who the unlawful assignees/subtenants/occupants are you can serve a Notice on your tenant pursuant to Section 40 of the 1954 Act giving them one month to provide the following information, which will allow them to gather evidence in support of the breach:

  • (a) whether the tenant occupies the premises or any part of them wholly or partly for the purposes of a business carried on by him
  • (b) whether his tenancy has effect subject to any sub-tenancy on which his tenancy is immediately expectant and, if so:
    • What premises are comprised in the sub-tenancy
    • For what term it has effect (or, if it is terminable by notice, by what notice it can be terminated)
    • What is the rent payable under it
    • Who is the sub-tenant
    • To the best of his knowledge and belief, whether the sub-tenant is in occupation of the premises or of part of the premises comprised in the sub-tenancy and, if not, what is the sub-tenant’s address
    • Whether an agreement is in force excluding in relation to the sub-tenancy the provisions of sections 24 to 28 of this Act
    • Whether a notice has been given under section 25 or 26(6) of this Act, or a request has been made under section 26 of this Act, in relation to the sub-tenancy and, if so, details of the notice or request.
  • (c) (to the best of his knowledge and belief) the name and address of any other person who owns an interest in reversion in any part of the premises. If the tenant does not provide the information you can apply to the court for an order that the tenant complies with the duty to do so and to make an award of damages in your favour. Please bear in mind that if you issue possession proceedings for failure to remedy the breach you will need to pay a court fee of £355 to start the claim. You must start the claim in the right court for the area in which the Property is located and bear in mind that some of the court are not staffed at present, so contact the court before issuing any claim to make sure it will be processed. If you issue proceedings before 25 June 2020 they will probably be stayed until that date, which means nothing more will happen until after that date. It is likely that there will be a backlog of cases after 25 June 2020 and much will depend on whether the Government extends Section 82 or the Courts extend PD51Z.

No. If your tenant is giving you back the Property before the tenancy expires you need to get them to sign a Deed of Surrender, which should also record any agreement about payments for any arrears of rent or future rent. If they are giving the Property back after the lease has expired, make sure you get them to sign (and witness) a document to confirm the time and date when the keys were handed over to you and they formally gave back possession to you. We suggest you also take some digitally dated photographs on your smart phone or other device to record the handover.

Contact our Landlord and Tenant solicitors in Ruislip, Middlesex

To discuss your commercial landlord and tenant matter, call The Sethi Partnership Solicitors today on 0208 866 6464 or complete our online enquiry form .

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

 

 

Call now
0208 866 6464

Get in touch

Contact us

Please let us know your name.
Please enter a valid phone number
Please let us know your email address.
Invalid Input
Please let us know your message.

File Upload

Please upload your documents here. Accepted file types are PDF only and a maximum size of 3mb.

Invalid Input
Please tick the box below.
Invalid Input