Coronavirus and the Law: Landlords, Tenants and Business: Where are we now?

Partner Jeremy Laws

Partner Jeremy Laws gives an overview of the law in relation to coronavirus for landlords, tenants and businesses.

Published: Wednesday 23 June 2021 – accurate at the time of publication.

 

From the outset of the Covid-19 pandemic in February 2020 we have published regular briefing notes and updates on key changes in the law relating to residential property, commercial property and businesses.  As lockdowns have come and gone, the measures that the government has introduced in response to the pandemic have been adapted and regularly extended.  In this update we draw together the latest position.

Residential Premises

There are slightly different rules for England and Wales – this note covers the position in England.

Notice periods in relation to possession proceedings for residential tenancies have been extended.  The extensions are currently in place until 30 September 2021.  

Section 8

For section 8 notices (which are the fault-based notices used to terminate assured tenancies) the basic notice period is currently 4 months.  However, this can be shorter if an exception applies.

Where rent arrears are relied on, if the arrears are at least 4 months’ worth then the notice period is reduced to 4 weeks.  

Notices relying on anti-social behaviour, domestic violence and some other grounds may have different notice periods.

For notices served on or after 1 June 2021, landlords must use a new prescribed form.

Section 21

For section 21 notices (the no fault notice ) the current minimum period of notice is 4 months.  Again, there is a new form of prescribed notice in effect since 1 June 2021.

Other matters

There are also some new rules in relation to County Court possession actions, which are currently in force up until 30 July 2021.

Claims in respect of debts only (i.e. rent arrears) can proceed as normal.

Finally, there may be restrictions on when possession orders can be enforced which effectively mean that they cannot be enforced. For example during periods of national lockdown, or where a certain region is subject to strict local restrictions or there is someone living at the property who is either self-isolating or has Covid-19 symptoms.

Commercial Premises

At the time of going to press, the current restrictions end on 30 June 2021.  However, it has already been announced that they are to be extended until 25 March 2022.  

The main restrictions are:

  1. Landlords are not entitled to re-enter their premises or forfeit for non-payment of rent.
  2. Modified restrictions apply where there were already proceedings afoot. These are no longer likely to have any significant relevance.

The restrictions only apply to business tenancies, and so the following are not covered:

  • Licences.
  • Tenancies at will.
  • Certain tenancies which the Landlord and Tenant Act 1954 does not cover.

The government has also recently announced that the restrictions on commercial rent arrears recovery (CRAR) will be extended. The total number of days’ outstanding rent required for CRAR will remain at 554 days.

Provisions in the Coronavirus Act 2020 also affect a landlord’s ability to rely on the non-payment of rent in opposing the renewal of a business lease.

Significantly, the government has announced that it intends to introduce new legislation to ring fence rent arrears that have accrued whilst businesses have been closed.  In summary, the landlord and tenant will have to agree a deal over the arrears or they will be subjected to a binding arbitration scheme.

For landlords, there are some aspects of both the new legislation and existing law which are favourable.  These include:

  • It will not be possible for a landlord to waive a right to forfeit by conduct all the time that the restriction on forfeiture is in place.
  • The restrictions do not prevent re-entry or forfeiture based on breaches of other covenants.
  • Debt claims (i.e. for rent arrears) can still be pursued.
  • Rent deposits can be drawn on.
  • Claims can be pursued against guarantors.

Company Law Matters

Provisions first introduced by the Corporate Insolvency and Governance Act 2020 currently prevent the presentation of winding up petitions against a company based on statutory demands.  Effectively this has made statutory demands useless during the restriction period.

Similarly, a winding up petition cannot be presented against a company based on its inability to pay debts unless the creditor can show reasonable grounds for believing that Covid-19 has not had a financial effect on the company and the company’s debt issues would have arisen in any event. 

The current expiry for these restrictions date is 30 June 2021 but it has been announced that this is to be extended to 30 September 2021.

There is also a current bar on wrongful trading actions against directors.  However, this is due to end on 30 June 2021 and it is not anticipated that this date will be extended.

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