Coronavirus Act 2020 – implications for business tenancies

The Coronavirus Act 2020 came into force on 26 March 2020 and includes many measures aimed at safeguarding the public and businesses during the pandemic.

The CVA 2020 provides that a landlord of a ‘relevant’ business tenancy cannot forfeit the lease (i.e. take back possession of the property) for non-payment of rent until after 30 June 2020. 

The CVA 2020 applies to most commercial leases, but probably not licences or tenancies at will.

Under the CVA 2020, ‘rent’ includes any sums payable under a business tenancy. This means that a landlord is not permitted to forfeit a commercial lease on account of rent, service charge arrears, insurance rent or any other sums that the tenant might owe under the lease.

The moratorium on forfeiture applies until 30 June 2020, although the government has reserved its ability under the CVA 2020 to extend this period.

Where a landlord is already seeking possession of property via the Courts based on rent arrears which accrued prior to the CVA 2020 coming into force, the Court will not make a possession order until after 30 June 2020. Likewise, if the Court has already made a possession order to take effect before 30 June 2020, the period for the tenant to vacate and return the property to the landlord will be extended until after 30 June 2020.

The CVA 2020 does not stop rent accruing under the lease – it simply prevents a landlord from taking the premises back on account of any arrears until after 30 June 2020. 

The CVA 2020 does not prevent a landlord from taking other steps to recover the arrears during the moratorium, which may include bringing a claim to recover sums owing via the Courts, serving a statutory demand on the tenant as a precursor to insolvency, or effecting Commercial Rent Arrears Recovery. However, these steps are unlikely to be appropriate where the arrears have arisen solely as a result of the pandemic. 

The CVA 2020 also does not preclude a landlord from taking steps to forfeit a lease where the tenant’s breach does not relate to sums owing under the lease. For instance, a landlord will still be permitted to forfeit a lease where the tenant has, in contravention of the lease, sub-let the property, made alterations without the landlord’s consent or failed to maintain the property.

We would encourage landlords and tenants to liaise with each other at any early stage and to be pragmatic in navigating their relationship and obligations towards one another over the coming months. 

It is essential that any new arrangements are documented formally so as to minimise the scope for future uncertainty and disputes.

Please contact us if you are a landlord or tenant wishing to better understand the options available, and for assistance negotiating and documenting any new arrangements.

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