Can a landlord forfeit the lease under COVID-19?
No – due to the Coronavirus Act 2020, which was passed on the 25th of March 2020, no evictions or forfeiture can take place for 90 days (until 30th of June 2020). The Government has the option under the Coronavirus Act to extend the 90-day limit if required.
For the avoidance of doubt, commercial landlords under the Coronavirus Act 2020 are barred from forfeiting a business tenancy for non-payment of rent.
Landlords should note that “rent” has a broad definition and may include any sum a tenant is liable to pay under a lease. Rent would also include a service charge, insurance rent, interest and any sums that are required to be paid under the lease.
Can I forfeit the lease after the eviction ban has been lifted?
Yes, you can, provided you have not waived your right to forfeit. Many commercial landlords would have negotiated the issue of rent with there tenants. Upon the 2nd quarter of non-payment of rent, many landlords may be tempted to contact the tenant why the rent has not been again. If the request to pay rent has been made after the rent was due, then the right to forfeit may have been lost.
Mr Sajjad Ahmad the CEO of the British Landlords Association (The BLA) said: commercial landlords will need to tread very carefully when dealing with rent arrears and forfeiture even when the eviction ban under the Coronavirus Act 2020 has been lifted. The scenario of commercial landlords losing their right to exercise forfeiture post ban on eviction is likely to be high. Commercial landlords should seek legal advice before taking any action.” He said.
Yes, landlords have a few options. The Coronavirus Act 2020 does not bar a landlord from taking alternative steps to enforce their security.
Under the current situation, all landlords ought to consider working with their tenants in dealing with rent arrears. An empty unit may be difficult to let, and landlords will have to pay full business rates on the vacant unit too.
However, if it is not possible to come to an amicable solution with the tenant, then the options available to the landlord are:
- Drawing on the rent deposit provided the lease has provisions to do so.
- Issue a money claim.
- Call on the Guarantors to make good the breach
The forthcoming Corporate Insolvency and Governance Bill will include restrictions on the use of statutory demands and winding up petitions to recover sums owed by tenants that are due the Coronavirus. So, it is likely landlords will not be able to use the Statutory demand option.
Waiving the right to forfeit
While considering triggering forfeiture, the landlord must not do anything which may waive the right to forfeit.
Waiver of the right to forfeit can occur where the landlord:
- Has knowledge a tenant’s breach.
- Does or performs an unequivocal act which in turn recognises the lease as continuing to exist and communicates that act to the tenant in writing or orally.
What action of a landlord may constitute a waiver?
Following a breach from the tenant, the following may give rise to Waiver of the right to forfeit:
- Accepting rent after the legal, contractual date.
- Demand payment of overdue rent, verbally or in writing.
Will I lose my right to forfeit the lease if I enter negotiations with my tenant?
No, the Coronavirus Act 2020 encourages landlords to negotiate rent payments with their tenants.
A landlord’s right to forfeit is protected if the landlord enters negotiations with a tenant regarding the rent provided, they do not expressly agree to waive the right to forfeit.
Can the right to forfeit be lost forever?
No. The ability to forfeit depends on the wording of the lease, however, the landlord is entitled to forfeit every time a forfeiture event under the lease arises.
Forfeiture is a complex area of law, and you should seek legal advice before you take any action to avoid expensive mistakes.
Does a landlord need to continue with their obligations under the lease?
Yes, landlords and building managers need to abide by their legal obligations. However, this needs to be done in compliance with the latest advice from the Government on the Coronavirus guidelines.
Some landlords with serviced offices or other units within units may have to provide enhanced cleaning services to prevent the spread of the Coronavirus. Depending on the wording in the lease or licence, the additional costs may be incorporated in the service charge.
Do I still have to pay business rates?
A limited number of commercial tenants have been granted a business rates holiday for this coming financial year. The list of tenants qualifying is growing. Currently, the tenants that may be exempt are:
- Retail units
- petrol stations
- dry cleaners
- drinking venues
- bingo halls
- Letting agents
- estate agents
Seek advice from the council to see if your tenant is exempt from the business rates.
Are our courts still open for possession claims?
Landlord lawyers are still issuing claims; however, the courts are not listing the possession claims until the eviction ban has been lifted. Trespass claims can still be issued under the Coronavirus Act 2020.
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Source: British Landlords Association
Author: Amanda Goldsmith
Date: 26th of May 2020