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