Under the Coronavirus Act a right of forfeiture (in which a landlord ends the lease early and takes back the premises) cannot be exercised in respect of non-payment of any rent (or other sums payable by a tenant to a landlord under a lease) until 30 June 2020.
Please note: the information contained in this legal update is correct as of the original date of publication
Under the Coronavirus Act a right of forfeiture (in which a landlord ends the lease early and takes back the premises) cannot be exercised in respect of non-payment of any rent (or other sums payable by a tenant to a landlord under a lease) until 30 June 2020, though this could be extended.
There is no requirement to demonstrate a Coronavirus link or indeed show any level of hardship in order to benefit from this protection.
The protection only applies to the prevention of forfeiture and so other methods of enforcement are seemingly still open to landlords at present. For example another route for landlords is the statutory demand process under which a landlord can make a formal demand for payment of a debt within 21 days failing which a winding up petition can be presented. However, it has been reported that the Insolvency Service is currently considering similar adjustments designed to prevent companies currently unable to meet debts due to Coronavirus from being forced into insolvency processes in the coming months. And though it has not been ruled out at present presumably the government would not have intended that Commercial Rent Arrears Recovery (CRAR) be used as an alternative to bypass this protection. CRAR allows a landlord to take control of a tenant's goods and sell them in order to recover an equivalent value to the rent arrears. We may see more guidance on this in due course.
Any failure to pay rent during the period of protection will be ignored when considering if the landlord has established a statutory ground under Part 2 of the Landlord and Tenant Act 1954 for refusing to renew a lease enjoying the protection of that Act. This is welcome protection for tenants who would otherwise have feared that non-payment during the protected period might be used against them by their landlord as a reason to refuse a statutory lease renewal.
The Coronavirus Act gives some welcome clarity around waiving rights of forfeiture. The term ‘waiver’ means that a landlord can lose its right to forfeit by taking action that recognises the lease as continuing to exist (e.g. by demanding rent or exercising CRAR). The Act states that, during the period of protection, no conduct by the landlord (other than an express waiver in writing) will be regarded as waiving the landlord’s right of forfeiture. Landlords may otherwise have felt the need to be more defensive in their actions and correspondence for fear of inadvertently waiving this right.
Non-payment of rent will still be a tenant’s breach of the lease and the rent remains due. It therefore must be paid in full at the end of the protection period otherwise a landlord will once again have the right to forfeit. For example any tenant that has not paid the March quarter’s rent will need to pay the March quarter’s rent as well as the June quarter’s rent by the end of the current protection period (or as extended). So while this is a welcome initial protection for tenants, there will be problems further down the line if a large amount of rent will still be due before businesses have had an opportunity to resume trade and recover sufficiently to meet this liability. It is also worth bearing in mind that the protection relates to non-payment of rent (and other sums due under a lease) specifically, and forfeiture is therefore seemingly still a possibility during this period if the trigger was insolvency of the tenant, or another breach of the lease such as damage to the premises by the tenant.
As can be seen, these measures do not mean that non-payment of rent is entirely without consequence. In particular, one thing a tenant should check is the wording of any future break provision it may wish to operate to ensure that the conditions are not so widely worded as to prevent the operation of the break because of the tenant’s historic failure to pay the rent when it fell due. We have found this more likely to be an issue in older leases.
We have seen a mixed response from landlords to tenants’ proposals for reduced rent, monthly rent and deferred rent. The clarity of this forfeiture protection coming into force will hopefully now give some time for landlords and tenants to reach agreement on fair rent adjustments, to ensure that everyone shares the pain during this unprecedented period.
National law firm Browne Jacobson has advised long standing retail client, Wilko on the sale and leaseback of its Nottinghamshire distribution centre in Worksop to logistics specialist DHL for £48m.
Law firm Browne Jacobson is pleased to announce that Suzanne Harlow has been appointed Non-Executive Director of its Retail, Consumer & Logistics sector.
Earlier in the year a number of fashion retailers, boldly announced the introduction of a charging fee for returning any product purchased via their online store. Yet, despite this commercial, and perhaps somewhat controversial decision, at least one major fashion giant that adopted this approach has recorded ‘historic highs’ in its September profits. Browne Jacobson partner, Cat Driscoll who heads up the firm’s commercial team in Manchester and is also head of its Fashion & Beauty sector discusses whether this change has put the average consumer off and whether the days of free returns are long gone.
This article is the second in a series to help firms take a practical approach to complying with the ‘cross-cutting rules’ within the new ‘Consumer Duty’ (CD) framework. The article summarises what it seems the Financial Conduct Authority (FCA) is seeking to achieve from the applicable rules (section 2 below) and potential complications arising from legal considerations (section 3).
The fashion industry has a mountain to climb when it comes to sustainability. More than 8% of greenhouse gas emissions come from the apparel and footwear industries, and approaching three-fifths of all clothing ends up in incinerators or landfill within a year of being made.
Created at the end of the Brexit transition period, Retained EU Law is a category of domestic law that consists of EU-derived legislation retained in our domestic legal framework by the European Union (Withdrawal) Act 2018. This was never intended to be a permanent arrangement as parliament promised to deal with retained EU law through the Retained EU Law (Revocation and Reform) Bill (the “Bill”).
The Chancellor’s recent mini-budget provided a significant announcement for business as it was confirmed that the off-payroll working rules (known as “IR35”) put in place for public and private sector businesses from 2017 and 2021 will be scrapped from April 2023.
Browne Jacobson has bolstered its commercial practice in the UK with the appointment of commercial contracts and international trade specialist, Emma Roake, into its City-based London team.
The Court of Appeal overturned the “fire and re-hire” injunction, finding that there was nothing in the express contractual provisions preventing Tesco from giving the notice to terminate employment in the usual way.
As has been widely reported this week, some 3,000 UK workers are taking part in a six month trial to assess the viability of a four-day working week without any reduction in their normal pay.
Amongst the measures being introduced are new rules on online reviews, price reduction promotions, enhanced rights for free digital consumers, GDPR-style fines and information requirements on online markets.
In anticipation of the adoption of the Building Safety Bill, our specialist compliance and regulatory team will give an overview of the measures proposed in the Bill.
From 6 April 2022, right to work checks on all migrant or settled prospective employees must be online and checks on British or Irish nationals will be manual (free) or digital (charged for).
The Presidents of the Employment Tribunals England and Wales and Scotland have issued a new road map for 2022-23, providing an update on the resourcing challenges faced by employment tribunals and the steps put in place to address these.
The Commercial Rent (Coronavirus) Act 2022 was finally passed yesterday (24 March) and comes into force immediately.
Browne Jacobson has broadened its national construction and engineering offering with the appointment of construction partner Zoe Stollard into its Birmingham office.
The Government appears set to announce plans on ‘living with Covid to restore freedom’. With the success of the retail and hospitality sector key to recovery, what protections will be on offer to tenants to deal with Covid-19 rent arrears?
In Nissan v Passi, the High Court recently considered the issue of an employee retaining confidential documents belonging to his former employer in the context of the employer’s application for an injunction seeking the return of such documents from the employee.
The levelling up white paper sets out a set of 12 priority ‘missions’ to be pursued by national and local government in the years to come. With measures covering regeneration, communities, connectivity, education, R&D, employment, and health.
The High Court has granted an injunction against Tesco preventing the dismissal and re-engagement (‘fire and rehire’) of employees in an attempt to remove a contractual entitlement to enhanced payment terms.
Browne Jacobson’s corporate finance lawyers have advised omnichannel prestige beauty retailer Sephora on its acquisition of Feelunique.
Our corporate finance team have advised the Myers Family Office, on its purchase of Vian Marketing, the holding company for leading stand-up paddleboard business, Tushingham Sails which is best known in the market for its Red Paddle Co brand.
All of the ‘big four’ supermarkets have seen equal pay claims submitted. The majority of these cases involve workers arguing that they have not been paid equally compared to distribution centres of the business.
Following on from our recent article on the release of the updated Code of Practice for dealing with commercial rent arrears that have accrued throughout the pandemic, we continue to highlight what the overall principles seek to ensure - fairness and proportionality for both landlords and tenants across each step of the arbitration process.
In Stuart Delivery Ltd v Augustine, the Court of Appeal was asked to consider the principles governing when the ability to appoint a substitute negated the obligation to personally perform work.
No retail and logistics specialist will have been surprised by the news that ecommerce businesses, responding to high customer demand during the pandemic, have contributed to a jump in warehouse lettings, or that one of the ecommerce disrupters within the retail sector has been rapid grocery delivery services.
Time is running out for the world to take action to slow the impact of climate change – the clear and unanimous message delivered from the world’s most prominent experts in the field in the Intergovernmental Panel on Climate Change (IPCC)’s recently published report on climate change.
The government has now published new regulations to replace the winding up restrictions mentioned above from 1 October 2021. The key point of interest from a landlord and tenant perspective is that these new regulations will prevent a landlord from presenting a winding up petition to recover rent until 31 March 2022 where the sums are unpaid by the tenant because of the financial effect of the pandemic.
Last week, the government published a policy statement to deal with rent arrears accrued during the pandemic for those businesses affected by the pandemic.
A court will not alter an unambiguous contractual term merely because it is unduly favourable to one party, imprudent or unreasonable or because it provides for one party to pay too high a price for something. However, a court can correct the literal meaning of a contractual provision by construction if it is clear both that a mistake has been made and what the provision was intended to say.
Break rights have proved a fertile source of litigation over the last few years. More often than not, tenants have found themselves on the wrong end of the decisions. However, a Court of Appeal decision yesterday has bucked that trend.
The delay in the full easing of lockdown restrictions and the knock on effect for certain tenants (particularly those in the hospitality and entertainment industry) has clearly caused a change of heart and the government has now announced a further extension of the restrictions.
One of the requirements for tenants to contract out of the security of tenure regime contained in the Landlord and Tenant Act 1954 is that they make a simple or statutory declaration before entering into the lease.