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Keeping the Doors Open: Final Extension to ban forfeiture on commercial premises

15 December 2020

At the beginning of the first lockdown period, the Government issued a ban on landlords forfeiting leases of commercial premises.  This ban was due to come to an end on 31 December 2020; however, on 9 December 2020 the Government announced a further extension which is effective until 31^st of March 2021. This is said to be the final extension.

In the normal course, a Landlord would have a number of remedies available to deal with a tenant who is in default, including:-

1. Suing for outstanding rent;
2. Forfeiting the lease, that is, obtaining possession of the premises;
3. Taking insolvency action to recover the rent.

In addition to extending the ban on forfeiture the Government has also extended the use of winding-up petitions until 31 March 2021.

Landlords and tenants of commercial property are encouraged, through the Code of Good Practice issued by the Government, to enter negotiations for new payment plans with transparency, flexibility and in good faith as this crucial sector of the economy tries to find its feet.

The Code sets out some key guidelines including:

1. If tenants can afford to pay rentals, they must;
2. Tenants must substantiate (with transparency) why relief is sought from landlords;
3. Landlords must take into account circumstances that tenants find themselves (the Code sets out relevant considerations);
4. That parties should negotiate alternate ways of moving forward with the commercial relationship, some examples given are:

• • Payment terms to be reduced to monthly as opposed to quarterly;
  • Reduction to rentals of other units let;
  • Deferral of the rental period or rent-free rental periods;
  • Use of deposit (or part) for rental payments and agreements to top up deposits;
  • Rental variations to be agreed, either reduce current rental to market-related rentals or to turnover based rentals;
  • Landlord waiving contractual interest for arrear rentals;
  • Landlord and tenant splitting the rental for the unoccupied period;
  • A fixed-time period for the payment plans and relief measures to apply;

5. Any new arrangements made should protect against forfeiture based on default of rent after the Coronavirus moratorium is lifted, subject to adherence to a rental payment plan.

Whilst landlords and tenants are not obliged to enter into any sort of variation of their tenancy agreements, parties would do well to adopt the Code of Good Practice.

Should you require further advice as to your legal remedies available to you, or should you need assistance in either drafting a variation to your lease agreement, please feel free to contact our Commercial & Agricultural Property Team or our Dispute Resolution Team.

This article was written for Redkite Solicitors by Ryan Hogarty and Julian Wintle.