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Coronavirus Act 2020 and forfeiture of leases

The government is currently preparing new legislation to protect the interests of tenants with the Coronavirus Act 2020 coming into force on 26 March. Here we provide an overview of what the key features of this legislation look like:

• The new legislation provides a moratorium on forfeiture of commercial leases for non-payment of rent. It is important to note that “rent” is defined to include any amount payable under the lease. This will apply to all payments that are required to be made by the tenant. It includes service charges, insurance payments and utilities. The moratorium will apply from 26 March and will be extended until 30 September 2020, or such later date as may be specified. 
• A landlord will not be able to evict a tenant for non-payment of rent whilst the moratorium is in place. However, rent is still payable and the tenant is still open to contractual or other enforcement.
• Failure to pay rent during the moratorium period is removed as grounds of objection by a landlord to a new tenancy under the Landlord and Tenant Act 1954. On 30 September 2020 a landlord will be able to claim for forfeiture for payments that became due during the moratorium period.
• The Act also prevents landlords from using Commercial Rent Arrears Recovery (CRAR) unless owed 189 days or more of unpaid rent.
• The legislation does not apply to a short lease that is less than six months. 

Whilst The Coronavirus Act should provide a useful tool for tenants looking to manage their cash flow, businesses need to be aware that once the moratorium period expires the right to forfeit will apply again - unless of course the government decides to extend the period.