25 March 2020

Covid-19: What do Commercial landlords need to know?

The latest advice for commercial landlords on forfeiture in relation to Covid-19

The government announced recently that a commercial landlord’s right to forfeit a commercial lease for non-payment of rent has been frozen until at least 30 June 2020.

While the freeze provides much-needed breathing space for tenants, commercial landlords are understandably concerned about what this means for them.

The Coronavirus Bill (“CV Bill”) that will bring the decision into law is currently at the Committee stage. It provides some clarification on the issue for commercial landlords.

What does the Coronavirus Bill say about forfeiture?

From the date the CV Bill comes into force (it is anticipated this will be the week of 23 March 2020) until at least 30 June 2020 a landlord cannot exercise their ability to forfeit a lease for non-payment of rent.

As this news comes just as the March quarter’s rent is due, it could have wide-reaching consequences for commercial landlords. This is particularly true because the deadline of 30 June 2020 can be extended.

In its current form, this freeze on forfeiture appears to be a blanket ban. It is not limited to circumstances where a tenant is unable to pay their rent as a direct result of Covid-19. Therefore, a landlord who has a tenant that has been in arrears pre-Covid-19 and is waiting for non-payment of the March quarter to forfeit, cannot forfeit the lease until after 30 June 2020.

The CV Bill does, however, relax the provisions concerning waiver of the right to forfeit.

In normal circumstances, if a commercial landlord speaks to or writes to a tenant about non-payment of rent, they automatically waive their right to forfeit for the non-payment. From the date the CV Bill comes into force again until (at least) 30 June 2020, in the absence of an express agreement in writing to the contrary, a landlord is free to engage with a tenant without waiving their right to forfeit for non-payment of rent.

Landlords and tenants may be able to use this time to come to a workable arrangement, to preserve their relationship and the tenant’s occupation, without the landlord having to resort to forfeiture.

Are there any circumstances where a commercial landlord can exercise their right to forfeit?

Technically a landlord can still exercise their right to forfeit for breaches other than non-payment of rent. However, appropriate notice still needs to be served on a tenant giving a “reasonable period” to remedy the breaches complained of. Given that many tenants are currently unable to open and trade, this begs the question “what is a reasonable period in these circumstances?” In any event, a court will have wide discretion (including taking account of Covid-19) when considering whether to grant a tenant relief from forfeiture.

We are closely monitoring the position.

Share this article on social media

About the Author
Andrew Walker, Partner, Head of Real Estate Dispute Resolution

view my profile email me

Got a question?

Send us an email

x
Newsletter HCR featured image

Stay up to date

with our recent news


x
LOADING