Forfeiture of Commercial Leases
Landlords cannot at present evict their tenants due to rent arrears, as one of a number of Government measures introduced to ease the burden on businesses due to the Coronavirus. Tenants will have welcomed this measure; their landlords almost certainly less so.
It makes no difference if the rent arrears pre-date the pandemic.
There are parallel – though slightly different – restrictions on landlords of residential properties. In this article we focus primarily on commercial leases, where there is a prohibition on landlords taking any repossession action through the courts, currently until 30 September.
This date has already been extended from 30 June and may be extended further.
Even when the stay is finally lifted there is likely to be a long backlog at the courts for claims to be processed and heard.
Subject to certain safeguards, a landlord in normal times, faced with a commercial tenant with rent arrears, may have the right to forfeit the lease by changing the locks without first issuing court proceedings. That is always a remedy to be exercised with caution for various reasons, but in any event such a remedy is also banned at the moment, again until 30 September. When the stay is eventually lifted it may be tempting for landlords to think of doing this as a short cut; but great care will still need to be taken.
There is no outright prohibition on a landlord forfeiting a commercial lease by changing the locks (again to be exercised with caution) for breaches of a lease other than rent arrears. However in almost all cases prior notice will need to be served on a tenant in this situation. We would not recommend taking this step without specialist legal advice.
Any tenant that has been contacted by their landlord and been threatened with eviction should also obtain legal advice.
As set out in my colleague’s article, other steps which are normally open to landlords, by way of insolvency action against tenants in default, may not be permitted at present.
Therefore, if you are affected at all by any issues of commercial rent arrears, whether as a landlord or tenant, we would recommend that you seek advice at the earliest opportunity as to how Covid is likely to affect the situation and how best to deal with the situation proactively.
Our specialist property and litigation teams can provide you with clear and practical advice.
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