The vast majority of businesses will have been affected by the ‘Lockdown’ with many being forced to shut temporarily. Unfortunately business expenses and outgoings do not cease just because they are closed. We are now over halfway through the initial 3 week Lockdown, but it appears that some restrictions will continue beyond this 3 week period. The time periods provided for in the Coronavirus Act appear to be based on the 3 month period to June 2020. The financial impact will last far longer.
Many businesses will have their turnover and particularly cashflow affected. The Government has introduced furloughing payments to assist businesses in meeting staff costs during this time, and some other financial support measures. Some businesses may be eligible for a loan but obviously this will have to be paid back and, given the uncertain future, many businesses will be reluctant to commit to large loans. There have also been news reports of banks requesting that personal assets be used as security for the loans and very high interest rates.
Accordingly, it is anticipated that many businesses may begin to accrue rent arrears and Section 82 of the Coronavirus Act 2020 has sought to provide some protection to business tenants who fall into arrears.
The vast majority of Leases will reserve the right for the Landlord to forfeit the Lease and re-enter the property in the event that the Tenant falls behind with their rent. Section 82 of the Coronavirus Act 2020 prevents those rights from being enforced by the Landlord until after 30 June 2020. However, depending on how matters develop in the next few months, that date could be changed and pushed back further.
If a Landlord had already issued possession proceedings prior to the Coronavirus Act 2020 coming into force last week then the Court is unable to make an Order that requires the Tenant to give up possession of the property before 30 June 2020. In the event that a Possession Order has already been made which requires the Tenant to vacate the property before 30 June 2020 then the date that the Tenant is required to vacate the property is automatically extended to a date after 30 June 2020.
Accordingly, there is little action that Landlords can take against Tenants to repossess the property at the current time. Technically it appears that Landlords can still pursue a separate Money Claim (i.e. not to seek repossession of the property) from Tenants however, we suspect that few Landlords will opt to take that course of action.
It is not all doom and gloom for Landlords though. If the Landlords were able to exercise their rights to forfeit Leases and re-enter the properties then they would become liable for other expenses relating to the property including Business Rates etc. Given the current uncertain future, Landlords may find it difficult to find a new Tenant. As such when things return to normal Landlords will have Tenants in situ who will hopefully re-start paying the rent as well as making payments to clear the arrears, rather than having empty properties costing them money.
The Government and Courts are encouraging parties to try and reach an agreement about how things will progress going forward. When the dust settles and some kind of normality returns, both Landlords and Tenants need to be reasonable in approaching matters and resolving outstanding issues.
If we can be of any assistance or you require further advice then please contact us.
This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.
