Extension to moratorium on sanctions by commercial landlord for rent arrears.
On 16th September, the Government extended the moratorium on the sanctions available to commercial landlord for rent arrear to the end of 2020. The new statutory instrument comes into force on 29th September 2020. The moratorium was initially introduced in March 2020 and was due to end on 30th June 2020. On 19th June, this was extended for a further three months and is now to the end of the year. Though rent will continue to fall due even during the moratorium, it is the options open to landlord for recover that will be affected.
Effect on Commercial Rent Arrears Recovery (“CRAR”)
On 19th June, the number of days’ of rental arrears required before acting under CRAR was increased to 189 days. This has been increased again, with effect from 29th September:
• Where notice is served up to 24th December, there must be a minimum amount of unpaid rent equal to 276 days due.
• From 25th December 2020, there must be a minimum of 366 days’ unpaid rent in order to serve notice for CRAR.
If you have tenants who do already have this level of rent arrears, you CAN still serve notice and enforce under CRAR.
Effect on Forfeiture
The Government extended the moratorium period of re-entry or forfeiture on business premises for non-payment of rent to 31st December 2020. This is effect of the Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No.2) Regulations 2020, which adjusts the relevant period under the Coronavirus Act 2020, section 82(1), from 29th September to 31st December 2020. This prevents landlords from forfeiting any commercial lease for non-payment of rent during this period.
Tenants should however be mindful that eviction and forfeiture and eviction are not the only remedies available to the landlord in case of failure to pay rent. The other remedies include and these are still available to the commercial landlord:
1. Calling on the rent deposit. The landlord can still draw down on the rent deposit in satisfaction of the rent due and could still require the tenant to top up on the deposit at any time.
2. Charging default interest. Most well drafted leases will provide for default interest to be charged in the event that rent is not paid within a time period. The landlord is therefore at liberty to continue to charge default interest as long as the rent is outstanding.
3. Withholding of consent. Many leases provide for the exercise of various rights by the tenants subject to the consent of the landlord. In most of these cases, one of the most common pre-condition for the grant of such consent is that the tenant shall not be in breach of the lease at the time of the request of consent. Such rights include, exercise of a break clause, underletting, assignment etc. If the tenant is in arrears of rent at the time of the request, the landlord will be within his right to withhold consent. This could have serious effect on the tenant, particularly if the break clause must be exercised on a particular date.