A ban on residential evictions in England and Wales was put in place at the beginning of the Covid-19 pandemic, extended until 20 September 2020.
When the courts begin hearing eviction cases again, the most serious cases will be prioritised, such as anti-social behaviour, criminal behaviour and rent that has not been paid for more than a year, meaning even more delay for unpaid landlords as the backlog is likely to take months to clear.
The burden on landlords
Property owners, who will still be expected to make monthly mortgage payments once the three-month mortgage holiday period has expired, and also, pay other expenses such as insurance, are being pushed to the limit. Where tenants are guilty of unacceptable or anti-social behaviour, landlords are powerless to act, which also impacts fellow renters who may share the property.
Where tenants are simply unable to pay the rent during the pandemic and associated disruption, landlords have little choice but to wait until eviction action can commence.
Communicating openly with tenants may help if both parties are willing to try and reach a negotiated agreement as to the payment of rent arrears. Tenants may also be able to apply for a discretionary housing payment from the local authority where they are in receipt of housing benefit or Universal Credit.
It is advisable to put the terms of any agreed payment schedule in writing to avoid any confusion and misunderstanding going forward.
Commercial lease obligations
Commercial leases require tenants to obey the law, to include any new regulations that may be implemented. This means that tenants need to comply with the government’s Covid-19 legislation, in particular as set out in the Coronavirus Act 2020.
In practice, tenants must follow the terms of the Act in respect of their use and occupation of commercial premises. Regulations are particularly stringent in respect of property used for food and drink, leisure and retail.
Where the person carrying out a business breaches government regulations, they could be liable to an uncapped fine.
Can a commercial tenant refuse to pay rent or end a lease?
A contract may become impossible to fulfil because of an event beyond the parties’ control, a so-called ‘force majeure’ event. However, force majeure is not usually mentioned in a commercial lease and there is no common law right allowing someone to rely on it unless it is specifically included.
If the lease contains a break clause, the tenant may be able to end it early. Alternatively, the lease may contain provision for a reduction in rent, if turnover falls below a certain specified level, a so-called ‘turnover rent provision’, although this will usually still require payment of a minimum rent amount.
Otherwise, a commercial lease would not usually contain any clause allowing for withholding of rent because of the effects of a pandemic.
It may occasionally be possible to claim frustration if the tenant can prove that failure of common purpose or illegality makes the lease agreement either impossible or radically different from what was initially envisaged, however, it is generally difficult to demonstrate this to the courts’ satisfaction. A commercial property expert will be able to advise whether this is a possible course of action.
Can a commercial landlord evict a tenant for non-payment of rent?
In March 2020 the government introduced a ban on eviction of commercial tenants over unpaid rent. This was initially scheduled to last until 30 June 2020, but has been extended to 30 September 2020.
During this period, landlords are also prohibited from using winding-up orders or statutory demands because of unpaid rent.
Payment for services
As well as usual services, provided by landlords and paid for by tenants, many premises will also now be required to undergo extra regular cleaning.
A commercial lease will usually require a tenant to pay reasonable cleaning costs and it may well be possible for a landlord to argue that extra services, where required by law, are reasonable.
If a landlord fails to provide the required service, there maybe a defence if a lack of resources prevented it.
Commercial insurance claims
Both landlords and tenants should check their insurance policy for any possible help it may give. If policyholders took out cover for notifiable infectious diseases a claim should be possible. Business interruption cover may also be an option where the law has required premises to close.
If the landlord’s policy includes pandemic cover, then the tenant may be entitled to suspension of rent payments.
Any insurance policy should be read carefully to ensure that any notice or other requirements are complied with.
Taking eviction action
Landlords will still be required to follow the correct eviction procedure to remove tenants from their premises. Notice periods must take into account the period during which eviction is not allowed.
Where rent for eight weeks or more has not been paid, eviction proceedings can be commenced.
A Section 21 notice can be issued to evict tenants for any reason, although not within the first six months of a tenancy.
A Section 8 notice can be issued to evict tenants for breach of the tenancy agreement, including for non-payment of rent.
The notice period must be for a minimum of three months.
As landlords try to weather the financial turbulence caused by the pandemic lockdown, they may be well-advised to take a pragmatic view. Evicting a tenant could be a lengthy procedure, bearing in mind the likely court backlog, and finding a new tenant in troubled times may not be easy.
For some, it may be a better option to negotiate with existing tenants to see if some way forward can be found. A practical solution may be to try and agree on a new payment schedule and offer some temporary relief to businesses that are unable to pay rent at present, but who hope to return to profitability shortly.
A commercial property lawyer will be able to advise on negotiations and ensure that any agreement is put into written form. They will also ensure that any disagreements are dealt with in accordance with any dispute resolution requirements contained in the lease.
Understand more about Landlord and Tenant law and get in touch with the team today if you’re seeking advice on any property dispute matters.
We have wide-ranging experience in property and commercial law, and were named as the ‘Commercial Disputes Specialists of the Year” in the Corporate Livewire Innovation & Excellence Awards 2020 as well as ‘Boutique Litigation Law Firm of the Year’ in both the 2019 and 2020 Global Awards by ACQ5.
If you would like to talk to one of our expert legal team about any queries you may have regarding insolvency or liquidation, contact the author, James Beat, or call the team today on 020 3968 6030 and we’ll be happy to help.
The above information is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your rights or legal advice about what action to take, please contact a legal advisor.