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  • COVID-19 and Your Commercial Lease: PART THREE: FORFEITURE
News 3
22
Apr
COVID-19 and Your Commercial Lease: PART THREE: FORFEITURE
News

DATED: 22 APRIL 2020

In the third of a four part series, Commercial Propert expert, Amy Husk looks at issues arising from a commercial lease which may affect both landlords and tenants during the COVID-19 crisis.

What if your commercial tenant stops paying the rent? Or, if you are a tenant and cannot pay the rent, what action can the landlord take? Forfeiture is the landlord’s right to bring the lease to an end in certain circumstances. Normally a lease contains a right for a landlord to forfeit the lease if the tenant:

  • Does not pay rent for around 14 days or 21 days (this varies with each lease)
  • Breaches a term of the lease or
  • Suffers an act of insolvency.

Coronavirus Act 2020 amendment to forfeiture for non-payment of rent

  • Until 30 June 2020 a landlord cannot forfeit for non-payment of rent under a business tenancy. Mining leases, certain agricultural tenancies, short term leases of six months or less and electronic communications code leases do not benefit from the protection.
  • Any court order made during the period from 25 March 2020 to 30 June 2020 relating to forfeiture proceedings already in progress cannot result in the tenant being required to give up possession until after 30 June 2020. Any court order already made at 25 March 2020 which requires possession to be given in the period up to 30 June 2020 will be treated as extending the date until after 30 June 2020.
  • The landlord’s conduct will not be treated as waiving any right to forfeit, unless the landlord gives an express written waiver. It would be sensible for landlords to make clear in any correspondence (including emails) relating to non-payment of rent that they are not waiving the right to forfeit (unless waiver is the intention).
  • It Is important to note that the date of 30 June 2020 could be extended and there is the power to extend it more than once.

Commercial Property team

Forfeiture on other grounds

The legal change only relates to forfeiture for non-payment of rent. Forfeiture on the basis of an insolvency event remains. Most forfeiture clauses will also permit the landlord to forfeit in the event of a breach of other obligations in the lease, for example repair. It is worth noting that:

  • The landlord would have to give the tenant a reasonable time to remedy the breach. During the lockdown there are likely to be practical difficulties with getting contractors on site. Unless the matter is urgent for safety reasons it seems likely the courts would consider it reasonable that the tenant should be afforded a reasonable time period after the government restrictions have been relaxed but what is ‘reasonable’ will depend on the particular circumstances.
  • The courts are likely to take a tenant friendly approach.
  • There are likely to be practical difficulties and delays with any court proceedings due to disruption to court services.

For further information on this or other commercial propety issues you may be facing please contact a member of our Commercial Property team who will be able to advise you from both a landlord and tenant perspective.

To find out more about other issues concerning a commercial lease during the COVID-19 crisis, read more at:

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

Authors

Amy Husk

Senior Associate Solicitor
Commercial Property
upper shape

Our Experts

Jeremy Burke

Head of Department
Commercial Property

Amrita Bartram

Partner
Commercial Property

David Redgate

Partner
Commercial Property

Amy Husk

Senior Associate Solicitor
Commercial Property

Simon Stempien

Senior Associate Solicitor
Commercial Property

Sophie Robins

Senior Associate Solicitor
Commercial Property

Allison Simmons

Conveyancing Executive
Commercial Property

Macauley Cubitt

Trainee Solicitor
Commercial Property

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