Protection for business tenants under the Coronavirus Act 2020

24 April

The Coronavirus Act 2020 (CVA 2020) came into force on 26 March of this year in response to the overwhelming effects of the coronavirus pandemic. The Act has significant implications for landlords and tenants and considerably impacts the ability of landlords to recover possession of property, which will be welcome news for any operators who lease their premises.

The Act effectively protects commercial tenants who cannot pay their rent as a result of the COVID-19 outbreak by preventing landlords from being able to evict them within the relevant period (as detailed below).

CVA 2020 Restrictions on Landlords

The CVA 2020 provides that during the period of 27 March 2020 to 30 June 2020 (the relevant period), or until whatever date the relevant period may be extended to, a landlords’ ability to forfeit a lease in relation to a relevant business tenancy will be restricted as follows:

Landlords will be unable to enforce a right of re-entry or forfeiture for non-payment of rent.
No conduct by or on behalf of a landlord is to be regarded as waiving a right of re-entry or forfeiture for non-payment of rent, unless the landlord gives an express waiver in writing.
Any possession orders following High Court proceedings for non-payment of rent that have already commenced must ensure that a tenant does not have to give up possession of the property until after the relevant period has ended.
If the High Court has already made a possession order due to non-payment of rent, which requires possession to be given during the relevant period, the tenant can apply to vary the order and in that instance the High Court must ensure that possession is not required before the end of the relevant period.
Any possession orders made following County Court proceedings to enforce a right of re-entry or forfeiture for non-payment of rent that have already commenced, must ensure that a tenant does not have to give up possession of the property until after the relevant period has ended.
Where the County Court has already made an order for possession to enforce a right of re-entry or forfeiture for non-payment of rent which requires possession to be given during the relevant period, the date for possession will be treated as having been extended so that it expires at the end of the relevant period.

A “relevant business tenancy” to which the above restrictions apply is essentially any business tenancy where the premises are occupied either by the tenant or by any lawful occupier (whether sub-tenant or licensee). The above does not apply for example to agricultural holdings, tenancies for less than six months or farm business tenancies.

It should be noted that it is not a requirement of these restrictions that the tenant’s failure to pay the rent is solely as a result of COVID-19. These restrictions will still apply irrespective of the reason for the non-payment.

Rights of the Landlord

The CVA 2020 does not restrict a landlord’s right to regain possession of a property for any reason other than non-payment of rent during the relevant period.

For example, a landlord obtains the right to re-entry because of a breach of other covenants. However, it should be noted that in this instance the landlord should take into consideration the effects of COVID-19 when considering what a reasonable period of time is for the tenant to remedy a breach, give-up possession or apply for relief.

The CVA 2020 does not prevent a landlord from pursuing other actions during the relevant period, such as exercising commercial rent arrears recovery (CRAR), although in practice it may be difficult to make such a claim during the coronavirus outbreak.

Renewal of a business lease which has security of tenure (protected tenancy)

If your commercial lease has the protection of the Landlord and Tenant Act 1954 then at the end of your lease term, you have a statutory right to a renewal lease on the same terms as the current lease (other than the level of rent you pay).

Under normal circumstances, landlords can refuse the renewal of a protected tenancy if they can prove that there have been arrears of rent during the term.

However, the CVA 2020 acts in the interest of the tenants, providing that the non-payment of rent during the relevant period will not be grounds for landlords to refuse a renewal of a protected tenancy. This ensures your statutory right to a renewal lease will not be impacted if you have been unable to pay the rent during the relevant period, which has been a cause of concern for some of our clients.

For further advice contact Brett Cooper on 01254 828300.