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Ordinarily, forfeiture can be an effective weapon for a landlord to obtain compliance with a tenant's contractual obligations under a commercial lease. However, during the COVID-19 pandemic, the use of this weapon for a landlord has been severely curtailed.
In this article we are looking at how the COVID-19 pandemic has affected commercial landlords.
Forfeiture means a decision by the landlord to elect to terminate or bring a commercial lease to an end. Prior to the COVID-19 pandemic, forfeiture could be elected by a landlord for any serious breach of a lease including non-payment of rent, not repairing a property, unlawful assignment or using a property for a purpose which is not permitted. This is now no longer the case.
The Coronavirus Act 2020
The Coronavirus Act 2020 (CVA 2020) came into force on 26 March 2020 and substantially affects the ability of landlords to recover possession of commercial premises. A landlord cannot forfeit a lease for non-payment of rent pursuant to Section 82(1) – (12) CVA 2020 during the relevant period. The relevant period was defined initially for the period 27 March 2020 – 30 June 2020. The relevant period has now been extended until 30 September 2020.
It should be assumed that all business tenancies will be affected by the CVA 2020 even if the tenant is not in occupation of the commercial premises by reason of the current COVID-19 pandemic. This restriction on forfeiting a lease for non-payment of rent will also apply to a commercial lease which is contracted out of the Landlord and Tenant Act 1954. A Licence or a Tenancy at Will will not be affected by CVA 2020.
It is important for landlords to understand that whilst forfeiture action cannot be taken for non-payment of rent, rent remains due and payable by the tenant. The CVA 2020 imposes a moratorium or a period of protection where forfeiture cannot be invoked for non-payment of rent. In effect, this moratorium ties the hands of landlords for the period from 26 March up to 30 September 2020 whether rent is unpaid for reasons relating to the COVID-19 pandemic or not.
Commercial landlords with experience of forfeiture will be aware of the need to ensure that its right to forfeit a lease cannot be waived by its conduct. The CVA 2020 is clear that there is no conduct by a landlord that can be regarded as waiving a right of re-entry or forfeiture for non-payment of rent unless the landlord gives an express waiver in writing that this is what it intends to do. The restrictions on forfeiting a lease specifically apply to the non-payment of rent. Rent is regarded as all payments that a tenant is liable to pay under a business lease and so will also include insurance and service charges.
Forfeit for non rent related breaches
How Pinney Talfourd can help
The above is meant to be only advice and is correct as of the time of posting. This article was written by Lisa Eastwood, Senior Associate in the Property Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of June 2020.