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 Tenants

In this briefing, we answer 10 important questions for commercial tenants 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 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 you are 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”

  • Your Landlord cannot forfeit your lease for non-payment of rent by changing the locks nor can they start a claim in court seeking forfeiture of the lease for non-payment of rent
  • If your Landlord has an existing order for possession which has not been executed before 26 March 2020 they cannot enforce it until after 30 June 2020
  • If your Landlord started forfeiture proceedings against you before 26 March 2020 and they come before the court in the “relevant period” the court must ensure that you are not required to give possession before the end of the “relevant period”
  • If you apply to vary a possession order which was made prior to or during the relevant period the court must ensure that you do 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 by you to pay rent during the relevant period and
  • Nothing your Landlord does will be regarded as “waiving” their right to forfeit or re-enter for non-payment of rent.

Yes, but only where the tenancy is not a “relevant business tenancy”. Your Landlord 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”. The Landlord 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 tenancy relating to electronic communications apparatus
  • a tenancy at will

If you are occupying as a licencee (as opposed to a tenant) then your Landlord will be able to bring possession proceedings once they have given you the notice stipulated in the licence or if no period is stated by giving you reasonable notice which is usually 28 days or one month.

Please bear in mind that your Landlord will need to pay a court fee of £355 to start a possession claim. They 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 they will need to contact the court before issuing any claim to make sure it will be processed.

If your Landlord issues 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”) your Landlord will be able to seek possession of the Property from the court.

If you are in breach of some other (non- rent) covenant in the lease then your Landlord will be able to pursue forfeiture by serving a Section 146 Notice on you. This could be in relation to your failure to carry out repairs, unlawful use of the premises, unlawful assignment or subletting.

Please bear in mind that your Landlord will need to pay a court fee of £355 to start a possession claim. They 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 they will need to contact the court before issuing any claim to make sure it will be processed.

If your Landlord issues 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 against you.

 

If the forfeiture arose from non-payment of rent then your Landlord 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 your Landlord will be able to enforce the order for possession, but not before 25 June 2020 due to PD51Z. This could be in relation to your 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, you can still apply to the court for a stay of execution to take effect beyond 25 June 2020 in the normal way. This could take some time to be heard and could be used by you to get more time in the premises. You will remain liable for mesne profits until you give back possession of the Property. Mesne profits means compensation from you to your Landlord for your use of the Property from the date of the possession order until you give it back to them.

Yes, there are a number of steps your Landlord can take against you which could result in any arrears of rent having to be paid. However some of these steps are expensive and time-consuming and could be drawn out by you if they want to delay matters. Ultimately if you do not to pay your Landlord or you have not got the money to pay your Landlord or you are on the verge of bankruptcy or liquidation, then your Landlord may have to write off some or all of the rent arrears and wait to get the Property back from at a later date after 25 or 30 June 2020. Your Landlord can take the following steps:-

  • If it suits your Landlord, try to reach an agreement with you which takes account of your financial circumstances and set in place a payment plan for any rent arrears
  • Inspect the Property in accordance with their rights under the Lease or tenancy upon giving proper notice to you
  • Trigger a Rent Review
  • Send a Letter of Claim demanding payment from you of the arrears, other sums due and interest at the rate stated in your lease and giving you 14 days to pay
  • If you don’t pay within 14 days of any Letter of Claim, your Landlord can use Money Claims Online to issue a claim against you for the arrears, other sums due and interest as well as legal costs
  • If you are an individual and your Landlord obtains a judgment against you this will affect your credit rating if you don’t satisfy any judgment within 31 days
  • Use a Rent Deposit, but your Landlord needs to ensure they 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 your goods and selling them
  • Serve a Statutory Demand on you 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 you to reach agreement with your Landlord.

Yes. You can take the same steps against your Guarantor as they might take against you as described in Question 6 above. Your Landlord will need to ensure that they comply with the terms of any Guarantee. Your Guarantor will be able to make a claim against you in turn or they might try to cancel or terminate the Guarantee, which could put you in breach of the terms of your lease.

If you become adjudicated bankrupt or your Company 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 your Landlord. The disclaimer process will be triggered by the officer-holder. Your Landlord should then be able to apply to the Land Registry to have any title for the Lease closed, so that he can relet the Property.

You could also apply for an Individual/Company Voluntary Arrangement to avoid going into bankruptcy/liquidation.

If you are an individual you could seek a Debt Relief Order (“DRO”) if your debts are no more than £20,000 which is similar to bankruptcy. If you get a DRO:

  • Your Landlord cannot recover any arrears of rent without the court’s permissiond
  • You are usually freed (‘discharged’) from your debts after 12 months and
  • The DRO remains on your credit record for 6 years.

Your Landlord would need to serve a Section 146 Notice on you in order to start any forfeiture process against you.

However if your Landlord is unsure as to who the unlawful subtenants/occupants are they can serve a Notice on you pursuant to Section 40 of the 1954 Act giving you one month to provide the following information, which will allow your Landlord to gather evidence in support of the breach:

  • (a) whether you occupy the premises or any part of them wholly or partly for the purposes of a business carried on by you
  • (b) whether your tenancy has effect subject to any sub-tenancy on which your 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 your 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; and
    • 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; and
  • (c) (to the best of your knowledge and belief) the name and address of any other person who owns an interest in reversion in any part of the premises.

    If you do not provide the information your Landlord can apply to the court for an order that you comply with your duty to do so and to make an award of damages against you. They would also seek against you the legal costs which they incur in making such an application.

    Please bear in mind that your Landlord will need to pay a court fee of £355 to start a possession claim. They 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 they will need to contact the court before issuing any claim to make sure it will be processed.

    If your Landlord issues 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 you want to give back the Property to your Landlord before the tenancy expires you need to sign a Deed of Surrender in order to bring your obligation to pay rent to an end when you leave or on some other future agreed date or in agreement for you paying a sum in settlement to the Landlord. If you are giving the Property back after the lease has expired, make sure you get your Landlord to sign (and witness) a document to confirm the time and date when the keys were handed over by you and that you have formally given back possession to your Landlord or their agent. We suggest you also take some digitally dated photographs on your smart phone or other device to record the handover.

    Contact our Commercial 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