The advice given in this article is correct as of 31st March 2020. The situation with Coronavirus is developing rapidly, so please do check our COVID-19 Insights Hub for the latest updates.
Under section 82 of the emergency Coronavirus Bill, the Government proposes to prevent evictions for commercial tenants who miss rent payments for a period of three months. This follows only a few days after the protection given to residential tenants.
However, this new protection only extends to business tenancies and does not extend to farm tenants who are protected by the Agricultural Holdings Act or the Agricultural Tenancies Act.
We have already been in discussions with a number of landlords who have voluntarily entered into arrangements with their tenants regarding the payment of rent during these difficult times.
As agricultural tenants will not be protected (unless their tenancies fall outside of the two Acts specified above), it remains open to the landlord to forfeit the tenancy in the event that rent is unpaid and in accordance with the terms of the tenancy.
With regards to tenancies protected by the Agricultural Holdings Act 1986, it has often proved difficult for the landlord to forfeit the tenancy. The most common way for the landlord to take action for possession when dealing with a tenant who has failed to pay the rent, is to first issue a Notice under the 1986 Act. There is nothing in the new Bill which prohibits the serving of that Notice. That Notice will give the tenant the opportunity to pay the rent within a two-month period. If the rent is not paid, the landlord may then serve a Notice to Quit which the tenant will not be able to contest. Again, there is nothing in the new Bill which prevents the service of a Notice to Quit during the three-month period.
As for farm business tenancies, it is more common for landlords to rely on their right to forfeit the lease. The new Bill will not prevent that action being taken during the three-month period as a result of non-payment of rent, provided the tenancy is a Farm Business Tenancy.
Rents for most agricultural tenancies are likely to have fallen due on 25 March. Landlords and tenants should have an early discussion about the rent which has fallen due. Landlords of tenancies protected by the 1986 Act may wish to consider serving a Notice to pay the rent. As above, the new Bill does not prevent this. Landlords and tenants involved in farm business tenancies will have to bear in mind that forfeiture action may still be taken in the event that rent due on 25 March has not been paid on time.
If you are going to have discussions regarding a reduction or deferral of rent payments, an agreement should be recorded in writing and signed by any guarantor. A discussion should take place as to whether interest should accrue on any deferred payments. There should be clear provisions as to what should happen in the event that any payments pursuant to the new arrangement are not made on time. It is important that the agreement is drawn up carefully so as to avoid a situation whereby the lease terms or any guarantee are waived.
The property litigation team at Stephen Scown LLP is well placed to guide you through the process.