COVID-19 EXPERT LEGAL INSIGHTS

The Coronavirus Act 2020 – The moratorium on forfeiture explained

30 April 2020

The restrictions imposed by the UK Government to help fight the spread of Coronavirus have hit thousands of businesses over the last few weeks. An Office for National Statistics survey found that 25% of businesses had temporarily closed or paused trading in the UK, based on answers of over 5,000 businesses surveyed.
 

In order to protect businesses and the economy, the Government has introduced provisions, under section 82 of the Coronavirus Act 2020 (the “Act”), preventing landlords from enforcing rights of re-entry or forfeiture (by proceedings or by peaceable re-entry) against relevant business tenants for non-payment of rent during the relevant period.

The moratorium on forfeiture will effectively mean that landlords will not be able to bring a lease to an end where tenants fail to pay rent for the period between 26 March and 30 June 2020, or such later date as the Government may see fit to ensure adequate protection for businesses.

What is rent?

For the purposes of the Act, the term “rent” includes any sums payable under the lease and extends to service charge, insurance payments, utilities, interest and any other payments due.

Relevant business tenants

The moratorium will apply to all business tenants as defined in Part 2 of the Landlord & Tenant Act 1954. This covers all business tenancies, but will not apply to those occupying by way of a tenancy at will or other contractual arrangement which does not grant exclusive possession. Similarly, the moratorium does not apply to short leases of six months or less (except where the lease contains a right to renew beyond six months, or where a period of prior occupation together with the lease term exceeds 12 months).

Cause of arrears
The tenant will not be required to prove that the rent arrears were caused by the outbreak of COVID-19.

Limitations

These provisions do not waive or even suspend a tenant’s obligation to pay rent under a lease, it simply prohibits forfeiture for a period of time. The moratorium on forfeiture does not therefore mean the debt is written off: other remedies for the recovery of rent, such as a pursuing guarantors (including any liable under an Authorised Guarantee Agreement) and withdrawing from a rent deposit,  are still available options for landlords whose tenants fail to pay rent. However, the Government’s press release last week confirmed that further emergency measures will be enacted to protect tenants from landlord’s serving statutory demands  and Commercial Rent Arrears Recovery will only be available to landlords when 90 days or more of unpaid rent is owed. 

In addition, once the moratorium ends,  landlords will be able to forfeit leases for both unpaid sums due during the moratorium period and for any unpaid sums that become due after it is lifted, including any accrued interest.

Lastly, it is important to note that the Act only prevents landlords from forfeiting leases for rent arrears, leases can still be forfeited where a tenant breaches other covenants contained in the lease such as permitted use, repair etc.

Conclusion

The moratorium provides a short-term tool for businesses to preserve and control their cash-flow, but they will need to budget any sums due during the moratorium, as being due by 30 June 2020, to avoid forfeiture in the future. The moratorium only defers payment so tenants should reach out to landlords now to try and negotiate rent holidays, reduced rents or alternative payment schedules. Whilst there is no obligation on the part of the landlord to agree any concession, we are seeing many landlords trying to help their tenants survive the current crises. Any agreement reached should be formally documented to avoid any ambiguity.

About the authors

Virginia Tournon is a trainee solicitor in the Real Estate team, having previously worked in the Immigration and Private Client teams.

Vanessa Rhodes  is a senior associate solicitor in the Real Estate team and is experienced in a range of commercial and residential property matters. 

COVID-19 related insights:

COVID-19 related insights:

Our COVID-19 statement

We recognise that these unique times are presenting unprecedented challenges for our clients and we are here to support you in any way we can.

Click to view

Can you get out of or suspend a contract because of Coronavirus?

Alex Torpey covers the key things to look out for if you are relying on the Force Majeure clause.

Watch the video on LinkedIn

Overcoming the challenges of co-parenting for separated and divorced parents

Rachel Freeman, Partner in our Family Law team, addresses some issues that we are seeing arise for separated parents in the current crisis.

Read the blog

Tech in Two Minutes - Episode 7 - The Coronavirus challenge for tech coworking spaces

Andrew Solomon speaks about the challenge for tech companies and coworking spaces during the current COVID-19 pandemic.

Listen to the podcast

The legal basis for lockdown

Alun Milford, Partner in our Criminal Litigation team, provides an in-depth look at the legal basis behind the current lockdown.

Read the blog

Managing your Migrant workforce in the COVID-19 crisis

On Friday 3 April, immigration partner and head of department, Nick Rollason, hosted a webinar looking at urgent issues employers are facing during the COVID-19 crisis and answered some of the key questions being raised.

Watch the webinar recording

Furlough leave and the Coronavirus Job Retention Scheme: key legal considerations for Employers

On Thursday 9 April, Andreas White, Partner in our Employment Law Team, delivered an overview of the scheme with a focus of the key legal issues for UK employers.

Watch the webinar recording

Coronavirus and the perils of signing your Will

Will instructions have apparently risen by 30% since COVID-19 reached our shores. What effect does COVID-19 have on Will signings? James Ward and Diva Shah in our Private Client team blog.

Read the blog

The juggling act of a single mother, home school teacher and head of a family team

Charlotte Bradley, Head of our Family Law Team, reflects on how the COVID-19 crisis has affected working parents like her.

Read the blog

The future public inquiry into COVID-19

Calls for a public inquiry are continuing to mount and are likely to prove difficult to resist. In this blog, Sophie Kemp considers the framework for such inquiries, and the key issues likely to form the core of its terms of reference.

Read the blog

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility