Section 81 of the Coronavirus Act 2020, which came into force on 26 March 2020, imposed various restrictions on properties let under residential tenancies, including extending notice periods required under statutory notices.
Perhaps of more significance, however, is the general stay placed on all possession proceedings for residential property. The stay was given legal effect by the new Practice Direction 51Z, which came into effect on 27 March 2020.
Under this new Practice Direction, all proceedings for housing possession brought under CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed for a period of 90 days from 27th March 2020. This effectively means that any pending possession proceedings will not result in possession being obtained until after the expiry of the stay. This applies even where a possession order has already been obtained and just needs to be enforced.
The Act also introduced measures to prevent business tenancies from being forfeited where the tenant is unable to pay rent. With March quarter day payments having been missed by many business tenants, they are now afforded protection from forfeiture of their leases (i.e. ending their leases for non-payment). It’s important to remember that the moratorium does not mean that a tenant’s next three month’s rent has been waived. The rent has only been suspended until the moratorium has ended, which the Act has stipulated as 30 June 2020, although this may be extended.
The Act specifically provides that no conduct by or on behalf of the landlord during the relevant period is to be regarded as waiving the right to forfeit for non-payment of rent. This will bring comfort to landlords as the right to forfeit will remain unless expressly waived in writing.
The Act states the moratorium is to apply to the payment of rent. On the face of it, this would exclude service charges, insurance rent and any other payments that may be due under the lease.
The Act however contains a wide definition of what is meant by rent as including, ‘any sum a tenant is liable to pay under a relevant business tenancy’. This would imply that service charges and insurance rents are included.
As a result of the Coronavirus outbreak, many tenants are already struggling to meet rental payments. The measures introduced provide adequate protection to tenants without interfering with landlords underlying entitlement to receive rent and other sums due to them and possession of their property.
On 23 April 2020, the government also announced a new raft of imminent legislation which will provide further protection for commercial tenants who have fallen into rent arrears. It appears that this new legislation will include a ban on the service of statutory demands and on the presentation of winding up petitions for unpaid rent, where the tenant’s inability to pay the rent is caused solely by the COVID-19 emergency.
The government has also announced that it will introduce secondary legislation to prevent commercial landlords exercising commercial rent arrears recovery (CRAR) against tenants unless rent arrears of at least 90 days are due to the landlord.
This news will no doubt be welcomed by tenants, but it does mean that landlord’s will have fewer and fewer options when faced with a tenant which has fallen into rent arrears.
Further detail on these new proposals can be found in our more detailed article here.
Should you require any advice in this area, please contact a member of our Property Litigation team: