On 25 March 2020, Parliament passed the Coronavirus Act 2020 (Act), which included emergency measures to provide some much-needed breathing space for business tenants who find themselves in financial difficulty due to the COVID-19 crisis, in the form of a moratorium on the forfeiture of commercial leases under s82 (s83 for Northern Ireland).

As of 26 March 2020, landlords will not be permitted to exercise a right of re-entry or forfeiture for non-payment of rent by business tenants until 30 June 2020 (and possibly later if extended). The definition of “rent” is broad and covers any sum a tenant is required to pay under a business tenancy, so will extend to insurance, service charge contributions and interest as well as principal rent.

Although providing some welcome and immediate respite to business tenants just in time for the March quarter date, it should be noted that s82 only serves to temporarily suspend the landlord’s right to forfeit and does not absolve a tenant from its obligation to pay the sums that fall due during the relevant period. Under the Act, a landlord’s right to forfeit can only be waived expressly in writing, so any conduct by a landlord during the moratorium will not amount to a waiver of the rents due. If sums are still outstanding when the moratorium expires, a landlord will still be entitled to seek forfeiture at that stage, unless some form of arrangement has been agreed between the parties.

The aim of the legislation is, therefore, to encourage positive discussions between landlords and tenants by providing them with an opportunity to work together during this difficult and uncertain time to reach an amicable result that is in the best interests of both parties. Although there is no single solution, options could include agreeing reduced rents, rent free periods, or monthly rent regimes to alleviate the financial pressure on tenants in the short-term.

It should also be noted that the moratorium only applies to forfeiture for non-payment of rent and does not prevent enforcement for any other breach of covenant under the lease, including insolvency.

Further, the Act does not prohibit a landlord from pursuing alternative enforcement action against a tenant to recover the arrears, for example winding up proceedings, CRAR or a money claim. However, with the current COVID-19 lockdown and court restrictions that are in place, one would query how effective such enforcement methods will be as a means of prompt debt recovery.

For further information, please contact Kenny Friday