I thought it worth updating you as to the current position with COVID-19 for landlords and enforcement of rent payments.
You may well have seen that on 23 March the Government has announced that business tenants will have protection from forfeiture of their leases until at least 30 June 2020. This provision will only delay the right to forfeiture – it will not affect a landlord’s right to claim forfeiture or recover rent after the 3 month period ends. The Government has said that it will monitor the impact on commercial landlords’ cash flow and “continues to be in dialogue with them”.
Although the legislation requires Royal Assent it is anticipated that this will be imminent. However, given that most leases contain a period of 7-21 days before a forfeiture clause can be instigated then it is likely the Royal Assent will be in place before forfeiture proceedings for non-payment of rent for this quarter day can be instigated.
The changes relate to non-payment of rent only and therefore it is still possible to forfeit leases for other breaches by tenants. However, depending on lease terms, in addition to annual rent the payments caught by the legislation could include insurance and service charge payments.
Certain landlord activities can amount to waiver of forfeiture although the legislation looks like it will require any waiver of forfeiture to be in writing. However, it may be worth setting out the precise terms of any agreement for delay of rent by way of a side letter to the lease.
The things that a letter should take into account are:-
- Whether the full amount of March quarter rent should be payable on 30 June 2020;
- Whether interest will be payable on these sums and at what rate; and
- Whether the deferred payment can be staggered over future payment dates.
I can assist in providing further advice on this or drawing up some agreements with your tenants. Government guidance is that landlords and tenants should communicate and make agreements.
Important Information for Tenants of Business Premises
The Government has brought forward legislation to allow a moratorium on landlords seeking to forfeit leases for non-payment of rent. If you are having any difficulties in meeting your rental obligations then it may be worth considering contacting your landlord to discuss a delay in payment.
The moratorium on forfeiture is until 30 June 2020. It is not clear as to whether this will be extended but it may well be depending on how the pandemic enfolds.
If you are seeking to take advantage of the moratorium on forfeiture and looking to delay rental payments then I would suggest that a side letter is drawn up to clarify exactly how and when the rental payments will be dealt with going forwards and how the deferred payments are to be dealt with. For instance, will interest accrue on them, will the deferred payment be payable in one lump or can this be paid in future instalments? Please do get in touch for advice and help on drawing up such a side agreement made with your landlord.
Given the difficult circumstances, we want to assure you that Lyons Bowe is and will remain open for business. Our head of commercial property, Sarah Baldwin says
“All of the businesses I speak to are, of course, concerned at the impact of COVID-19 on them and their business. As the situation changes on a daily basis, business needs can move very quickly. We are here to assist and offer practical and legal advice on any aspect of your commercial property or business lease which may be concerning you”
If you are a landlord or tenant worried about the effect on your business and need legal advice, we are happy to help. Please call our office on 01749 345756 and ask for Sarah Baldwin