Concerns for business tenants during lockdown

Following the Prime Minister’s speech on 23 March 2020, only essential business and commercial premises will have remained open although, with restrictions beginning to ease, many businesses will be concerned for the future of their organisation post-lockdown.

The implementation of the Coronavirus Act 2020, which received royal assent on 25 March 2020, saw the introduction of measures introduced by the Government in a bid to assist commercial tenants. With the current period of protection ending on 30 June 2020, many businesses will be left thinking about what this means for them. Whilst the government have always maintained the option to extend the period of protection, whether they will or not remains to be seen.

Broadly speaking the current protection, amongst other measures to prevent what has been termed ‘aggressive rent collection’, provides that during the ‘relevant period’ (e.g. until 30 June 2020):-

  • Commercial landlords are unable to forfeit a lease due to the non-payment of rent by tenants (whether this be by re-entry or proceedings); and
  • For forfeiture claims issued before the Act, tenants cannot be ordered to give up possession before the end of the relevant period.

Rent is defined as being any sum which a tenant is liable to pay under the lease and the moratorium applies to business tenancies as defined in Part 2 of the Landlord & Tenant Act 1954.

The practical implications of the measures introduced by the Act mean that tenants have been afforded a small window of breathing space although it is important to note that:-

  • During the moratorium tenants remain liable for their rent; and
  • Absent of any further developments, Landlords will still have a right to forfeit a lease and recover any rent arrears from 1 July 2020, leaving tenants exposed at the end of the moratorium (unless it’s extended).

As such, whilst one may query whether a Landlord would wish to forfeit in the current climate, and bearing in mind that further protection may be introduced, tenants should be cautious about not paying their rent at all and seek advice should any action be taken in respect of their lease, whether before or after 30 June 2020.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.