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Moratorium on Forfeiture of Business Tenancies

The Coronavirus Bill made its way through to Parliament, and received Royal Assent on 25 March 2020.  Although the vast majority of the Bill relates to the availability of the health and social care workforce and efforts to slow the spread of the virus, there are some provisions in it restricting the ability of a landlord of commercial property to forfeit a lease for non-payment of rent or to oppose the grant of a new business tenancy on the basis of a persistent failure to pay the rent.

The key points to be aware of are:

  • From the day that the Bill receives Royal Assent until 30 June 2020 (“the Relevant Period”), a landlord may not forfeit a commercial lease for non-payment of rent. The Bill defines “rent” as including any sum a tenant is liable to pay under a commercial tenancy.  This means that, in theory, the restriction applies to non-payment of rent, service charges, insurance rent or other any other sums due under the lease.
  • A landlord cannot waive the right to forfeit unless it expressly chooses to do so. This means that once the Relevant Period has expired, the landlord may be able to take action to forfeit in respect of a failure to pay the rent due on the March quarter day.
  • Neither the County nor the High Court can grant an order forfeiting a lease which gives a landlord possession prior to the end of the Relevant Period.
  • The rent will still be payable by the tenant. The Government is encouraging landlords and tenants to cooperate with each other and seek to agree a way forward.
  • The legislation does not prevent the landlord from taking other action to seek to recover outstanding rent, such as pursuing action that could result in the insolvency of the tenant company. This is generally done by a landlord serving a Statutory Demand and, if the tenant fails to pay the sum demanded, by presenting a winding up/bankruptcy petition.  However, in some circumstances, a landlord may immediately be able to present a petition against a company tenant.  Please see our note on questions frequently being asked by landlords as to other options available to landlords.
  • A landlord will not be able to rely on a failure to pay the rent during the Relevant Period to support an application to oppose the grant of a new business tenancy under the Landlord and Tenant Act 1954 on the grounds of a persistent failure or delay by the tenant in paying the rent.

 

The firm has also set up a support hub to assist with key issues arising from Covid-19.  This covers a range of topics including contracting, supply chains and employment. A link to the support hub is here: https://www.freeths.co.uk/coronavirus/

If you would like to talk through the consequences for your business, call our Coronavirus Helpline on 0845 404 4111 for a free consultation (on appropriate commercial enquiries only).


The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
Paul Tomkins

Author: Paul Tomkins

Partner and Head of Real Estate Litigation

Jill Carey

Author: Jill Carey

Director

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