Business tenancies: protection from forfeiture etc
- Forfeiture is a right to end a lease by a landlord at an earlier date than the lease would normally end because of some default by the tenant. The right to forfeit is a contractual right rather than a common law or statutory right and most contracts contain express provisions for forfeiture.
- The Act ensures that leases cannot be forfeited for non-payment of rent for a three-month period for all types of commercial tenants but still allows for forfeiture at the end of the period for such non-payment. This works to encourage businesses that are in a position to make their rent payment to do so, whilst providing three months’ grace to those that are struggling.
- This position is in line with the Government’s previous announcement to bring forward primary legislation to prevent the eviction of private rented sector leaseholders.
- The protection period recognises that commercial property landlords may in cases of rental arrears be deprived of an income stream for the period, and will be delayed in gaining possession of the property to sell or put to alternative use-it is aimed at being a proportionate response to both parties.
- This Act provides that where non-payment of rent enables a landlord to treat a lease as forfeited, that right will not be able to be exercised for a period of three months (to 30th June 2020)-with a power to extend if it is needed.
- Landlords are still be able to claim forfeiture after the three-month period (either by peaceably re-entering the premises or by issuing a claim for forfeiture).
- The protection applies to all business tenancies within the meaning of the Landlord and Tenant Act 1954 (the "1954 Act"), whether or not they have opted out of the protections afforded by the 1954 Act. In Northern Ireland, it applies to all business tenancies within the meaning of the Business Tenancies (Northern Ireland) Order 1996 (the "1996 Order") and to any tenancy to which the Order would apply if any relevant occupier were the tenant.
- The 1954 Act allows a landlord to oppose the right of a protected tenant to renew where there has been a "persistent delay in paying rent". This could be a problem for a tenant who is relying on the moratorium against forfeiture whose lease comes up for renewal during the moratorium period. The tenant’s behaviour during the moratorium period could give the landlord a ground to oppose their renewal in future. This period is therefore to be ignored for the purposes of section 30(1)(b) of the 1954 Act.
- The 1996 Order allows a landlord to oppose the right of a protected tenant to renew where there has been a ‘persistent delay in paying rent’. This could be a problem for a tenant who is relying on the moratorium against forfeiture whose lease comes up for renewal during the moratorium period. The tenant’s behaviour during the moratorium period could give the landlord a ground to oppose their renewal in future. This period is therefore to be ignored for the purposes of Article 12(1)(b) of the 1996 Order.
- Landlords are protected for the period of the forfeiture moratorium: the non-collection of rent by the landlord during the period will not be treated as a waiver of the right to pursue rent.
- The moratorium only applies to non-payment of rent. Landlords continue to be able to exercise other rights of forfeiture; for example, a tenant is not allowed to cause willful damage.
