What does the Coronavirus Act 2020 mean to you as a Landlord with a Business Tenant in England and Wales?
In light of the COVID19 pandemic, the Government have been forced to act and have therefore granted a new Law that amongst other matters, protects the interests of businesses that hold properties under Business Tenancy Agreements/Leases.
They have done this by introducing the Coronavirus Act 2020.
The measures that have been introduced to protect commercial tenants are set out within Section 82 of the new Act. Another important issue to note on this is that this Section also contains extensive provisions for cases where proceedings for forfeiture have already been commenced in the High Court or County Court.
This particular article has only been prepared on the basis that there are not already such proceedings underway.
There are some tenancies that are not covered by the new Law, and these are: –
Although the Act has been introduced to protect commercial tenants that cannot afford to pay their rent, there is no means test to determine the tenant’s affordability with this Law.
So what does your tenant have to pay?
Basically, any sum that your tenant would normally be liable to pay under the terms of their Lease (i.e. main rent, insurance contributions, service charges and any other payments due under the lease) will still be due to you.
Where does this leave you?
You should note that under this new Law, it only protects the tenant from the landlord forfeiting the Lease during this period. It by no means creates a rent-free period, nor does it remove your other remedies, so any arrears for rent or other sums will need to be paid at some point.
How long is this period I have to wait before I can take possession action against my Tenant?
The current period afforded by the new Act takes us to the end of June 2020. This period may be extended as and when decided by the Government.
Are there any other options?
We have come across this question quite frequently over the last month.
Some of the options that we have discussed with our clients are:
Deed of Variation
Your tenant may have already started to discuss with you the difficulties that they are experiencing in paying your rent, and may have offered to pay any arrears over a period of time
This option may be the best for you where you have a long lease with the tenant, and you are both eager to maintain the working relationship.
In cases such as this, you can agree to enter into a Deed of Variation with the tenant which allows for them to pay a higher rental amount to you which would include the payment of the rent that is due, and an instalment towards the rent owed to you at the end of each month or quarter (depending on the payment terms within the Lease), once the tenant’s business is operational again.
Deed of Surrender
Where your tenant has contacted, and you and they have made the difficult decision that they can no longer trade in the future, you need to consider how best to deal with the matter.
You are entitled to the rent due under your Lease, however with the prospect of knowing that this tenant cannot pay you at this time, you may want to consider inviting the tenant into a Deed of Surrender. This means that the Tenant has agreed to hand back the property to you, and you are free to source another Tenant for your property.
Moving back to the position on the rent that is due to you, there are several options available to you for the recovery of these. A member of our litigation team will be happy to talk you through these. These may include considering the option of issuing a claim for the money that is owed only at this time. A member of our litigation team would be able to take you through the different recovery actions that may be available to you.
What should I do next?
If you do require any assistance or even a non-obligatory chat, please do contact a member of our Commercial Property or Litigation Team on:
T: 0116 2999 1999 Option 0