The Coronavirus Act 2020, which was enacted on 25 March 2020, contained an unprecedented raft of measures to protect the public and the economy, including commercial landlords and tenants.
The spectre of further lockdowns during the winter means that it’s essential that commercial landlords and tenants are fully aware of their legal rights and obligations and the practical options to steer a safe course into 2021.
This article seeks to address the key immediate questions facing landlords and tenants in light of these unprecedented challenges.
The Coronavirus Act 2020 included protection from eviction for tenants who cannot pay their rent due to the impact of coronavirus. These measures mean no tenant can be forced out of their premises if they miss a rent payment up to at 31 December at the earliest. However, tenants should be aware they will still be liable for rent arrears accrued during this period after that date.
Where a rent deposit is held by the landlord, the landlord may in the short term be able to use the deposit to cover a period during which the tenant is unable to pay rent.
Where tenants are unable to pay the rent in full for a prolonged period, the Government are asking both parties to follow its new Code of Practice for Commercial Property Relationships During the Covid-19 Pandemic (https://www.gov.uk/government/publications/code-of-practice-for-the-commercial-property-sector/code-of-practice-for-commercial-property-relationships-during-the-covid-19-pandemic).
Many leases contain a mechanism for termination on the service of a period of notice. If businesses can continue to function without the premises, they should consider exercising the break. It is of critical importance that, if tenants do serve notice to break, notice is served in strict compliance with the procedure for doing so and that the break conditions are complied with.
Landlords and Tenants should check with their insurers whether they have opted for cover which includes losses arising from infectious diseases and may be able to claim if the tenant is unable to pay rent or to meet its obligations.
Where landlords are obliged to provide services in exchange for tenants paying a service charge, both obligations will remain in effect.
Landlords should ensure compliance with their obligations to provide services where there is no option to scale these back but, where permitted to do so, should reduce service provision to reduce the financial burden and offset the risk tenants will be unable to repay service charge.
Yes. Voluntary arrangements, such as temporary reductions in the rent and rent free periods can ease the financial burden on tenants and reduce the risk of insolvency. Where such arrangements are agreed they should be properly documented to ensure they are legally binding.