The advice given in this article is correct as of 26th March 2020. The situation with Coronavirus is developing rapidly, so please do check our COVID-19 Insights Hub for the latest updates.
Rent quarter day, restrictions on recovery of possession of commercial property and agreeing rent holidays.
Under the emergency Coronavirus Bill the Government has proposed a moratorium on forfeiture of commercial tenancies for a period of 3 months.
Forfeiture or re-entry is the landlord’s right to determine the lease in the following instances:
- Where the tenant is in breach of any of its obligations under the lease.
- On the occurrence of certain events specified in the lease, such as the tenant’s insolvency.
Given the current policy aims of the government to protect businesses and jobs, a moratorium on landlords’ remedies for non-payment of rent is understandable, although could be hard for landlords who depend on rents for their own income.
The rent (and any accrued interest) are still due. In principle, a landlord will be able to take action once the moratorium has expired. However, we would expect the government to announce a transition period to ensure that landlords do not immediately forfeit or take action to recover arrears which might undermine the purpose of the current restrictions and any recovery.
Given that rents are due imminently either on the 25th March quarter day, we would recommend discussing arrangements about rent payments with tenants now. When agreeing rent arrangements you should keep these points in mind;
- Put the agreement in writing, and include any guarantor.
- The agreement should make clear that it is not a waiver of lease terms or any guarantee, which remain in full force and effect, or of landlord’s remedies.
- Set out clearly what is being agreed, and whether interest will accrue on the instalments/deferred payments.
- Critically, you will need to be clear that the full sum will fall due together with interest and costs if the tenant fails to keep to the agreement; if you do not, you may be able to enforce only the payment of the instalments that have fallen due.
Avoiding ambiguity now will avoid disputes later. The Property Litigation Team at Stephens Scown LLP is well placed to guide you through the process.