As mentioned in our previous posting, the new provisions introduced as a result of Covid 19 by the Coronavirus Act 2020, mean that business tenants have now received protection from the landlord’s usual right to take back possession of the premises by forfeiture if the tenant does not pay the rent on time.
This does give some relief for struggling tenants but it should be remembered that although the immediate worry of possible forfeiture of the lease is removed, the obligation to pay the rent and any service charge or other payments under the lease (such as insurance premiums) does not go away and those sums will have to be paid sooner or later. Note too that the protection from forfeiture is only temporary, currently until the 30th June 2020, subject to any extension that may be brought in by the Government nearer to that date.
Many landlords will be anxious to keep their tenants in occupation and to receive rent albeit on some reduced or delayed basis. It is important that any concessions offered by the landlord to a tenant should get prior approval from any landlord’s lender to prevent the landlord falling foul of its banking and mortgage obligations and covenants.
Although a landlord cannot for the time being proceed by way of forfeiture, there are still other remedies available should it be decided not to accept or offer any concessions but to take formal action:
- A landlord is still entitled to issue court proceedings to recover the rent or other sums payable under the lease, to claim interest on arrears and to apply to have a tenant company wound up by issuing a statutory demand for whatever sums are owed.
- There may be a rent deposit taken when the lease was granted and this might be available to use.
- There may be a guarantor of the tenant’s obligations within the lease, to whom the landlord can issue demand for payment.
- If the current defaulting tenant is an assignee, there may be a previous tenant who is liable for lease payments under the terms of an authorised guarantee agreement.
- The landlord could also use the commercial rent arrears recovery (CRAR) process if it chooses to do so, in order to attempt to seize goods of the tenant at the premises.
So, whether you are a landlord or a tenant, contact any of our team at Clifton Ingram for advice in these uncertain times.