Tuesday, 24 March 2020

COVID-19: Government Issues Temporary Moratorium on Forfeiture of Commercial Leases

Please now see my later blogpost on the moratorium following the passing of the Coronavirus Act 2020.

 The government has stepped in to help commercial tenants who cannot pay their rent by ordering a moratorium on the forfeiture of business leases to last until 30 June 2020.

This has been welcomed by retailers and leisure businesses that have been ordered to close by the Prime Minister as the Covid-19 lockdown intensifies, especially as it comes just in time for the March quarter day.

Many landlords and tenants are already having conversations and reaching voluntary arrangements about rental payments due shortly, but the government says it recognises that businesses struggling with their cashflow due to coronavirus remain worried about eviction.

Under the moratorium, landlords will not be able to forfeit business leases if their tenants fail to pay their rent. 

However, without further extension, landlords will be able to forfeit or recover rent when the moratorium ends on 30 June 2020, which is 6 days after the June quarter day on 24 June.

So this is a delay of forfeiture rights, not a complete waiver of rent for this quarter.

The measures are included in the emergency Coronavirus Bill currently going through Parliament.

It's unclear at present whether other methods of enforcement are affected by the moratorium (for example CRAR).

Businesses that will stay open include:

·       Restaurants, strictly for food delivery and takeaway services
·       Cafes or workplace canteens at hospitals, care homes or schools, prisons and military centres, or providing food and drink to the homeless
·       Supermarkets and premises offering food, including market stalls
·       “Health shops” including pharmacies
·       Corner shops, newsagents and post offices
·       Pet shops, hardware stores, bicycle shops, launderettes, car rentals and garages

Landlords will be concerned how this affects their lending arrangements. The government says:

“As commercial tenants will still be liable for the rent after this period, the government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.”

Communities Secretary, Rt Hon Robert Jenrick MP, said:

“We know many commercial landlords are already setting a great example by working closely with tenants and offering rent deferrals or holidays. However, these new measures will provide reassurance to businesses struggling with cashflows and ensure no commercial tenant is evicted if they cannot pay their rent because of coronavirus over the next 3 months.”

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