Thirsk Winton LLP

Covid-19 and Commercial Leases

Kerrie Atlee, trainee solicitor in our commercial department, considers options available to landlords and tenants under Coronavirus Act 2020 restrictions.

As a Tenant of a Commercial Lease you are protected by Section 82 of the Coronavirus Act 2020 which has afforded protection to Tenants from 26 March 2020 and has now been extended until 31 March 2021. This means that Landlords do not have the ability to forfeit a lease if a Tenant has not made payment of rent.

To give further protection to Tenants who find themselves unable to pay their debts; the Government has also extended legislation which prevents Landlords being able to wind up a company through issuing them with Statutory Demands between the period of 1st March – 31st March 2021.

A procedure called Commercial Rent Arrears Recovery (CRAR) can be used to recover debts to the value of what the Tenant owes, where there has been non payment rent, but this has been extended from 7 to 189 days. This legislation will only be in place until 31st March 2021 unless the Government makes further changes. Please be aware that Tenants remain liable to pay their Landlord any rental arrears once this date has passed.

If you are a Landlord you may be concerned that non payment of rent is having a serious effect on your own finances/business. If your Tenant is still in arrears after 31st March 2021, you have options. Landlords can consider issuing Court Proceedings for breach of the lease and using the CRAR method of seizing goods to the same value. It should be noted that CRAR can only be used if you have a written rental agreement.

However, court action should be considered carefully and as a last resort. Alternative routes may prove more advantageous. Finding a new Tenant may prove difficult in the current delicate financial climate due to the closure of many businesses. It may be better to give consideration to discussing with your tenant a temporary reduction in the rent. This may assist with the Tenant’s cash flow and remove the risk of leaving your premises empty. Another option to consider could be legally binding rental arrears agreement entered into with your Tenant whereby both parties agree to pay back the rent arrears over a set period of time with interest.

The moratorium on forfeiture of commercial properties is not means tested . Landlords are restricted by the legislation until at least the 31st March 2021. Do remember this is not to be regarded as a rent-free period for Tenant(s) and they will remain liable to pay back what they have missed in this period. It is highly advisable to always seek legal advice before pursuing enforcement action against a Tenant.