Landlord and tenant update – July 2020
Restrictions extended and a new code of practice
Since the Coronavirus Act 2020 (“the Act”) came into force on 25 March 2020, there have been a number of updates and new measures introduced by the Government.
This note takes a look at the key changes which landlords and tenants should be aware of.
- The Civil Procedure Rules 1998 have been amended to include a new CPR Rule 55.29. This extends the stay on possession proceedings from 25 June 2020 until 23 August 2020.
- The Act requires Notices served under section 8 and 21 of the Housing Act 1988 to specify a minimum notice period of 3 months and the prescribed forms have been updated to reflect this. This provision is in effect until 30 September 2020.
- Section 82(1) of the Act placed a moratorium on forfeiture for the non-payment of sums due under a lease until 30 June 2020. This has been extended until 30 September 2020.
Commercial Rent Arrears Recovery
- The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (No.2) (Coronavirus) Regulations 2020 prevent landlords from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 189 days’ rent (extended from 90 days).
Winding Up Petitions
- The Corporate Insolvency and Governance Act 2020 which came into force on 26 June 2020 prohibits the presentation of winding-up petitions from 27 April 2020 which are based on statutory demands served between 1 March 2020 and 30 September 2020.
- Further, a winding-up petition cannot be made during the period from 27 April 2020 to 30 September 2020 unless the creditor can satisfy the court that the company’s inability to pay its debts has not been caused by the Coronavirus pandemic.
Code of Practice
- Ahead of the June quarter day, the Government published a “Code of Practice for commercial property relationships during the COVID-19 pandemic”. This is intended to reinforce and promote good practice between landlords and tenants and applies across all commercial sectors until 24 June 2021.
- The Code is voluntary, not legally binding. However, it has been endorsed by a number of organisations including the British Property Federation. It focuses on a number of principles including “transparency and collaboration”, adopting a “unified approach’, “acting reasonable and responsibly” and utilising “Government support” where available.
- It makes it clear that tenants who can pay rent should do so. If tenants are unable to make payment in full, they should seek to reach an agreement with their landlord to pay what they can. Landlords should make concessions where applicable, providing clear reasons for refusals and tenants should be prepared to provide evidence to support their requests.
- It also sets out possible arrangements which landlords and tenants may reach. For instance, rent deferrals, monthly rents or rent free periods in return for the removal of a tenant break option or an extended lease term.
- In respect of service and insurance charges, the Code makes it clear these should be paid in full but recognises there may be circumstances where charges should be reduced, for instance where the lack of use of a building has lowered costs. The Code also acknowledges that there may be instances where additional service costs are required (i.e. health and safety requirements re COVID-19).
The full Code of Practice can be viewed here.
Although the measures have meant landlords are left with fewer options to recover sums which they are owed under leases, landlords may still be able to:
- pursue former tenants (noting that a formal notice must be given within six months of the relevant amount falling due)
- pursue former guarantors under Authorised Guarantee Agreements (noting that a formal notice must be given within six months of the relevant amount falling due)
- pursue guarantors
- recover directly from subtenants (notice must be given to subtenants in advance of taking such a step)
- make rent deposit withdrawals
- issue debt recovery proceedings
It is important that landlords and tenants take note of the changes and measures above and continue to work together. If agreements are reached, then these should be carefully documented by the parties’ solicitors.
If you want to discuss any aspect arising out of this note, please contact a member of the Teacher Stern Property Litigation Team: