Due to the clear economic impact of COVID-19, there had been a ban on commercial evictions for a period of time. This means that landlords of commercial leases cannot evict their commercial tenants and that this applied to all commercial leases. The ban commenced from 26th March 2020 and was originally due to end on 30th June 2021 (the Relevant Period). However, it was announced by the UK Treasury on 16th June 2021 that the Relevant Period is now set to be extended until at least 25th March 2022.
There may be additional legislation put in place that will control how debts are to be recovered after the expiration of the Relevant Period. It is likely extra protections will be put in place that will protect commercial tenants from eviction due to non-payment of rent for the foreseeable future. Whilst this has all been clearly announced by the English government, it is expected that the Welsh government will follow suit.
Throughout this relevant period, commercial landlords will be prevented from carrying out the following actions:
- They cannot use the right of re-entry or forfeit the lease due to non-payment of rent
- Landlords will be restricted from selling a tenant’s goods in order to recover rent
- If High Court proceedings have already commenced in relation to forfeiting the lease due to non-payment or the right of re-entry, any permission granted or possession order made must ensure that the tenant will not have to give up possession of the property until the end of the Relevant Period
- In the event the High Court has already granted an order for possession to enforce the right of re-entry or forfeiture for nonpayment of rent that allows a landlord possession during the Relevant Period, a tenant can apply to vary the order. If the High Court vary the order, the date must be after the Relevant Period
- If County Court proceedings have already commenced in relation to forfeiting the lease due to non-payment or the right of re-entry, any permission granted or possession order made must ensure that the tenant will not have to give up possession of the property until the end of the Relevant Period
- In the event the County Court has already granted an order for possession to enforce the right of re-entry or forfeiture for nonpayment of rent that allows a landlord possession during the Relevant Period, a tenant can apply to vary the order. If the High Court vary the order, the date must be after the Relevant Period
Whilst this means that commercial landlords cannot evict on the grounds of non-payment of rent it does not prevent commercial landlords from evicting all together. There are multiple ways and reasons for which a (commercial) landlord can terminate a tenancy and resultantly evict a tenant. For example, a tenant in breach of covenant(s) may allow a landlord to initiate forfeiture proceedings separate to an issue of non-payment. Therefore, commercial tenants should still be aware that landlords can still evict or forfeit the lease on different grounds.
The extension ban simply affects proceedings and actions in relation to non-payment of rent. Landlords are still able to exercise other powers granted through lease agreements or other legal documentation. For example, it will not prevent landlords from using the rent deposit, claiming for rent owed against guarantors, or claims for damages.
In addition to this, commercial landlords will still be able to initiate eviction proceedings for non-payment of rent. Whilst the High Court or County Court must not grant an eviction order that allows for eviction during the Relevant Period, commercial landlords may still be able to ask for one that allows for eviction immediately after the Relevant Period.
What is a commercial tenancy?
Only commercial tenancies are subject to this ban extension. A commercial tenancy is a tenancy that has been granted for the purpose of commercial activity being carried out at the premises. If a business approaches a landlord in order to use their property to carry out business activities at said property, this is a commercial tenancy. Therefore, residential homes would not be subject to this ban of commercial evictions. If a lease has been entered into for residential purposes, then it is most likely not a commercial tenancy. Some commercial tenancies may allow for certain residential activity to be carried out on said property, but this must be a small part of the purpose for the tenancy. The main focus of any commercial tenancy is commercial activity being carried out on the property.
What is non-payment of rent?
Any lease (regardless of whether it is commercial or residential) will require some form of rent. Rent would be a sum of money that is required to be paid to the landlord as consideration for using the landlord’s property. Rent may not always just be the monthly rent but could include the cost of additional services such as maintenance and repairs carried out in common areas. What constitutes rent will be defined within the tenancy agreement. Not all monies owed to the landlord will constitute rent but a tenant should check what has been defined as rent.
What is forfeiture and re-entry?
Forfeiture is an act a landlord can do in order to terminate the lease before the agreed upon termination date contained in the lease agreement. Forfeiture is not an automatic right that all landlords have. Rather, the right must be contained in the lease agreement and explain under what circumstances a landlord can forfeit the lease. If the right is not contained in a clause of the lease, then the landlord cannot use forfeiture proceedings. The ban in place means that landlords cannot forfeit the lease because of non-payment, even if the lease allows for this.
In normal circumstances, a landlord can re-enter the premises in order to carry out forfeiture. This is sometimes called peaceful re-entry. The landlord can enter and change the locks thus preventing the tenant from entering the premises and continuing to use the property. However, this has also been prevented under the ban in relation to non-payment of rent.