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COVID-19: Protection from forfeiture in commercial tenancies

Following on from the COVID-19 update about residential tenancies, the Coronavirus Act 2020 ("the Act") introduced on 25 March 2020 has also provided protections for commercial tenants in order to ease the burden this pandemic will have on businesses.

Section 82 of the Act provides commercial tenants with protection from eviction by forfeiture.

How do landlords forfeit a tenancy?

In order to forfeit a tenancy under ordinary circumstances, the tenancy agreement must contain a clause which allows them to forfeit the lease under certain circumstances, such as rent arrears.

If the tenancy agreement contains a forfeiture clause, then the landlord may regain possession of the property by:

• Peaceable re-entry; or
• Court order.

Forfeiture clauses are common in commercial tenancies and provide the landlord with a quick way to regain possession of the property where the tenant is in breach of the tenancy agreement.

What protection does the Coronavirus Act 2020 provide for commercial tenants?

Section 82 of the Act provides that a right of re-entry or forfeiture for non-payment of rent may not be enforced between 26 March 2020 and 30 June 2020. However, the Secretary of State has the power to extend this period if necessary.

This section provides relief for those businesses which are suffering financially and are therefore unable to pay rent due to the pandemic.

What about ongoing forfeiture proceedings?

The courts are still able to make an order for possession during this period, however section 82 specifies that such an order cannot take effect before 30 June 2020, or if this period is extended, the expiry of such period.

Furthermore, the Act also provides that where the period specified in a court order grants possession between 26 March 2020 and 30 June 2020, possession may now only be gained after 30 June 2020, therefore granting protection to those tenants who are already the subject of forfeiture proceedings.

Are the changes all bad news for the landlord?

It seems that the changes are heavily weighted against the landlord. However, the Act also provides that during this time, no act or conduct by the landlord may be regarded as waiving the right to forfeit, except by giving an express waiver in writing.

Additionally, the Act is silent on other remedies commercial landlords may seek for non-payment of rent, such as:

• Commercial Rent Arrears Recovery;
• Winding up proceedings being brought against tenants who are in arrears; or
• The right to forfeit for breaches of covenant which do not relate to the payment of rent.

It should also be noted that a commercial tenant is still liable to pay rent and where possible, this should be done as usual.

For more information contact Jordan Davies in our Business Dispute Resolution department via email or phone on 0333 207 9300. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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