Due to the impact of COVID-19 on commercial business, earlier in the year the UK Government introduced a moratorium on a Landlord’s ability to forfeit a commercial lease for non-payment of rent. Sections 82 and 83 of the Coronavirus Act 2020 brought in the first moratorium as a response to the initial impacts of COVID-19 on commercial businesses; particularly addressing those businesses that could not stay open during the initial period of three months from March 2020. However, due to the ongoing effects of the virus, the government has extended the moratorium until 31 December 2020, as at the time of writing.
In order for a tenancy to qualify for this moratorium, it will need to be a business tenancy (which is defined), but most commercial leases, with the exception of those for a term of less than six months, should be included. The rent that has not been paid is specified as including any sum that the Tenant is liable to pay to the Landlord under the business lease and so could include any service charge, rent or insurance contributions which have been included within the definition of rent within the lease.
Not only can Landlords not forfeit the tenancy due to the non-payment of such rent under these provisions, they cannot be granted a possession order over the property for any proceedings that have occurred between 26 March 2020 and 31 December 2020. Landlords can, however, continue to demand the rent and charge interest at the rate specified within the lease which is unpaid during the moratorium period.
Landlords can also forfeit a lease for any other reason which is permitted and can pursue actions such as utilising rent deposits or claiming against guarantors. Landlords and Tenants should also be mindful of the Code of Practice for commercial relationships which, although voluntary, sets out the framework to encourage a responsible, collaborative approach between Landlords and Tenants in order to agree or resolve terms where possible.
For a more detailed summary of this moratorium, please see our full note here.
For tailored advice regarding this or another related matter, please contact Philip Sewell, Sarah Walker or another member of the commercial disputes and regulation or commercial property teams.