Updated as of 10/12/2020
Eviction moratorium extended until 31 March 2021
The government has announced that the protection from forfeiture given to relevant business tenants under s82 of the Coronavirus Act will be extended until 31 March 2021. The temporary CRAR changes are also extended to 31 March 2021.
Further guidance to support commercial landlord and tenant negotiations and rent payment options will be published shortly. This will presumably be read in conjunction with the existing voluntary Code of Practice for commercial landlords and tenants which encourages transparency and collaboration.
The Corporate Insolvency and Governance Bill will also be amended to extend the moratorium for statutory demands and winding-up petitions to 31 March 2021.
The government has confirmed that it will be looking to review the commercial landlord and tenant legislation in early 2021. Such a review will consider a broad range of issues including the security of tenure provisions of the Landlord & Tenant Act 1954, different models of rent payment, and the impact of Covid-19 on the market.
In reality, it is hard to envisage the review taking precedence over the other priorities in the legislation timetable but the clear implication is that the government intends to make the leasing process more tenant-friendly.
We have more about the options for landlords dealing with rent arrears in our post here.
Updated as of 16/09/2020
The topic of insurance has once again stepped into the limelight with the handing down of the long-awaited judgment on the FCA’s ‘business interruption insurance’ test case which was handed down yesterday.
Read our update here;
Original post from 27/04/2020
With COVID-19 impacting on every aspect of the UK economy, we consider the potential issues for commercial landlords and property investors. In particular, what happens to the liabilities under a lease if the tenant is forced to close their premises or if a landlord is required to close a multi-let building, business park, shopping centre or retail park?
Insurance to the rescue?
It is tempting for landlords to treat this as the tenant’s problem; after all, surely they have business interruption insurance to cover such situations. But tenants could easily find that their insurance (if they have it) won’t cover business interruption losses caused by a forced closure for COVID-19 reasons. Tenants may have procured business interruption policies, but this is usually linked to property damage. Non-damage business interruption cover (which might cover the impact of a pandemic like COVID-19) has been available in the insurance market, but not commonly bought. Nevertheless, tenants should check their policies.
In the UK, the government has confirmed that COVID-19 is a “notifiable disease” under the Health Protection (Notification) Regulations 2010. This is a formal classification required by many insurance policies, so tenants who have business interruption cover may be able to claim under it, depending on the specific terms of their policy, and they should be prepared to challenge insurers who seek to deny their claims. If the tenant has no such cover, however, tenants may seek to argue that they should not have to comply with their covenants (e.g. to pay the rent) when they cannot use the premises. In the case of rent suspension provisions, this will require landlords to look carefully at their own insurance policies. This is discussed in further detail at point 3 below.
This guidance note considers the following liabilities under a lease:
- Quiet Enjoyment and Derogation from Grant
- Withholding rent
- Rent suspension – landlord’s insurance
- Repudiatory breach
- Other issues including emergency regulation and maintenance obligations