Covid-19 - Moratorium on Commercial Lease Forfeiture - A Welcome Respite for Tenants Struggling During the Current Lockdown
Under the recently enacted Coronavirus Act 2020, a moratorium (temporary restriction) has been introduced preventing commercial landlords from forfeiting a commercial lease for the non-payment of rent until 30th June 2020 (or such extended period as Government may dictate as the current crisis continues to unfold).
The moratorium applies to all commercial tenants in England, Wales and Northern Ireland and applies to all leases whether protected under the Landlord & Tenant Act 1954 or not.
During the moratorium, it is important to note that whilst forfeiture is not an option the landlord is able to pursue, any payments under the lease will remain due with the landlord still able to pursue other remedies including, for example, withdrawing payments from any rent deposit monies which may have been lodged or use of the commercial rent arrears recovery (CRAR) process. It is also important to note that, unless agreed to the contrary, any default interest provisions applicable under the lease will also continue to apply, resulting in landlords being able to charge interest on arrears (commonly 4% above base) during such period.
In addition still, it is also important to note generally that any forfeiture provision will remain valid and enforceable as regards any other specified forfeiture event (as commonly the right to forfeit will also apply to breaches of covenant generally and tenant insolvency). The moratorium also does not prevent a landlord from serving notices under the Landlord & Tenant Act 1954 to bring a lease to an end or from either party exercising any contractual break options which may exist.
Finally, as the moratorium does not act as a waiver of the landlord’s right to forfeit, on expiry of the moratorium (currently 30th June unless extended), a landlord will then be free to seek to forfeit the lease where any arrears remain unpaid.
In light of the above, whilst the moratorium will undoubtedly be seen as a benefit to tenants who may be struggling during the current crisis, this is very much a short term measure which simply postpones any existing issues rather than settling or addressing them. As such, as a firm, we remain of the view that, where required, the best approach for a tenant is to have an open and honest discussion with their landlord as regards their ability to pay the rent and to seek to agree a suitable position which is acceptable to both parties.
If you require any further information or assistance as regards any of the above, please contact Craig Burton.
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