Yesterday, we provided an update setting out the impact of COVID-19 on landlords and tenants. See the article here. However, last night (23 March 2020) the government set out emergency measures for commercial tenants who cannot pay their rent because of coronavirus which changes part of the advice set out in that update.
The government has announced that commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction. Many landlords and tenants may already have had conversations and reached arrangements about rental payments, but the government is acutely aware that businesses will struggle with cashflow during this unprecedented time.
The emergency measures mean no business will be forced out of their premises if they miss a payment in the next three months. However, given commercial tenants will still be liable for the rent after this period, parties should work together to reach a sensible agreement.
This means that landlords cannot take action to forfeit a lease as doing so will likely result in (i) the court granting a tenant relief from forfeiture (ii) unlikely recovery of landlord’s legal costs and (iii) potential liability for damages caused as a result of the forfeiture. It’s unclear, but seemingly unlikely, that a landlord can evoke the Commercial Rent Arrears Recovery (CRAR) procedure.
The inability to evict will give comfort to thousands of small businesses. The government acknowledges that parties should be able to reach agreement but having this backstop will provide much needed peace of mind.
The change will come into force when the Coronavirus Bill receives Royal Assent (and the ability to recover unpaid rent through other means should be clarified) and will last until 30 June 2020.
If you have any queries in relation to this update or want to discuss steps you can take to protect your position, please do get in touch.