Suspension not Protection: Business Tenancies & Non-Payment of Rent during Coronavirus

The rent here may be low, but I believe we have it on very hard terms’, so said Marianne.

We are in lockdown. Italy has Italian tenors serenading neighbours, Spain has Spanish Police dancing in the streets and the UK is about to reveal its method of merriment in lockdown. One thing however is clear: most UK businesses will have no footfall through their doors. Cash flow – the lifeblood of any business – will be severely affected. What then of businesses unable to pay their rent? The Government (by way of amendments to the Coronavirus Bill) proposes to shield businesses from the immediate consequences of not paying rent.

The right of a landlord to bring a business tenancy to an end – by way of re-entry or forfeiture –for non-payment of rent will now not be enforceable during the “relevant period” – three months beginning the day after the Coronavirus Bill becomes law and ending 30 June 2020 (or such later date as the government may specify). Any court order made during this time in favour of a landlord will be read as if it said that the premises is to be delivered up immediately after the end of the (three month) “relevant period”. This purports to protect business tenants from re-entry or forfeiture of their leases for non-payment of rent.

The amendment is not a broad shield for business tenants during this pandemic. The amendment simply postpones the consequences of non-payment of rent; it does not eradicate them. Landlords and business tenants will note: (1) this is a suspension of enforcement during the relevant (three-month) period, it is not a defence to non-payment; (2) the amendment does not prevent forfeiture or re-entry for other breaches of covenant not relating to non-payment of rent during the pandemic; (3) landlords will not be considered, by their conduct in observing this (to-be-enacted) law, to have waived their right to re-enter or forfeit for non-payment of rent after the three-month period is over; and (4) any orders in favour of the landlord made by the a court in proceedings initiated before the “relevant period” (i.e., before the Coronavirus Bill is enacted) will ensure that the tenant does not have to give possession of the premises to the landlord before the end of the “relevant period” – again, a suspension, not a protection.

The government is therefore instituting a moratorium. Businesses will no doubt welcome this protection from the dark consumer days brought and to be brought by this virus, but will decry that the protections do not go far enough.

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Guest post by Matthew R. Crowe of Trinity Chambers.

Source:

Coronavirus Bill 2019-20, 23 March 2020, Committee of the Whole House <https://publications.parliament.uk/pa/bills/cbill/58-01/0122/amend/coronavirus_daily_cwh_0323.pdf>

Charles Holland -
Barrister

Licensing law, chancery/commercial litigation and property.

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