Can Landlords Force Eviction Over Non-Payment of Rent During Coronavirus?
Businesses across England welcomed a provision in the Coronavirus Act 2020 that Landlords would be unable to force evictions over non-payment of rent.
For many tenants, especially those who were forced to cease trading, such as gyms, pubs and restaurants, this was taken as an informal ‘rent holiday’ measure option.
Landlords cannot ‘forfeit’ (terminate) a business lease, if the Tenant does not pay rent during the ‘relevant period’ – which ends on 30 June 2020 (or a later date to be announced).
When the measures were unveiled at the end of March, Business Secretary, Alok Sharma MP was quoted as saying:
“This measure will provide companies with an essential safeguard in these highly unusual times as they deal with the impact of coronavirus.
This is part of the unprecedented package of support we have put in place to protect jobs and livelihoods right across the country.”
Threat
However, the obligation to pay rent – and interest on late payment – continues to roll up during the lockdown. Where a Tenant has not paid rent during the ‘relevant period’ they face a backlog of rent and interest payments in the future.
In breaking news today, some Landlords haven’t waited for the end of the lockdown before taking action to recover rent. Landlords have numerous remedies available to them for non-payment of rent. Forfeiture of the lease is just one, and not usually the preferred one.
Landlords are already seeking recovery of rent during the lockdown, employing other more traditional measures for recovery: seeking recovery of arrears as debt and threatening Tenants with insolvency proceedings.
David Lloyd and Puregym are among a number of high-profile Tenants in the news who are being faced with debt claims or threatened with winding-up proceedings.
Compromise
The government has made clear that it will expect people to be reasonable in their attempts to negotiate a compromise wherever possible. We have certainly taken this approach in counselling both Landlord and Tenants. If a mutually acceptable compromise can be reached – and legally documented – that is very likely to be the best way out of these difficult circumstances.
One could infer, from the government’s rhetoric, that where a party seeks to exploit the current situation for unfair commercial gain, they may find that they ‘reap what they sow’ in years to come.
The Coronavirus Act 2020, drafted in challenging circumstances, will inevitably be interpreted and scrutinised in Court in years to come. When Covid-19 Landlord and Tenant cases are brought before the Courts, as we have no doubt they will, judges may well to take a dim view of any perceived ‘bullying’ tactics.
Commercial Loans
Many Landlords do not have the luxury of indulgence. Not every business – including the business of being a Landlord – is in the same boat.
A Landlord with other sources of income and little or no borrowing can afford to be generous. But one with a heavily financed property portfolio will still have loan repayments to make and will need to maximize their rental income.
Although the government has announced payment holidays for residential mortgages – and even buy to let mortgages – there are no such concessions available for commercial loans. Banks must and will continue to be paid unless the government intervenes. There is no obligation on a residential landlord to pass the mortgage payment holiday on to tenants – residential tenants would have to make their own separate application for a rent holiday.
How Can We Help?
We can advise on or manage negotiations between commercial Landlords and Tenants, with a view to achieving a compromise agreement. Because the Landlord and the Tenant invariably have entirely different interests, we don’t act for both parties: we take instructions from either Landlord or Tenant and provide legal advice framed in commercial reality.
Discounts for Commercial Clients Affected by Covid-19
A lease is usually executed ‘as a deed’ and can only be legally varied by deed. If you and your Tenants or Landlord have agreed to vary the terms of the lease, even on a temporary basis, please give us a call so we can ensure this is captured in a legally binding document. A short, simple ‘Deed of Variation’ can capture the agreement now and avoid dispute later.
As a small contribution to the crisis we are all facing, we are offering to draft your Deed of Variation at a heavily discounted rate.
Please give us a call on 01332 364436, email legal@timms-law.com or fill in the contact form on our website. There may be a short delay in responding to you, but we are very much open for business, from a safe distance.
Nikola Guthrie
14th April 2020