24 Mar 2020

Moratorium on forfeiture

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You may have seen in this morning’s press an important development that will impact on a landlord’s options for dealing with premises.

It is the significant news that the House of Commons passed yesterday a moratorium on forfeiture for non-payment of rent by business tenants. This was part of the emergency Coronavirus Bill that goes to the House of Lords today and is bound to be enacted very soon indeed. The position appears to be as follows:

  • No forfeiture is possible for non-payment of rent by business tenants between now and 30 June 2020. The moratorium period is extendable by the government. 

  • “Business tenants” means any lease protected by the 1954 Act or which would be protected if the lawful occupier was also the tenant. This includes tenants on contracted-out leases.

  • “Rent” is also defined as any sum which a tenant is liable to pay under a business tenancy, whenever due. It would therefore appear to cover service charge etc.

  • During this period, the landlord cannot waive the right to forfeit except by an express waiver in writing.

Everyone will need time to digest this and work out the implications. Rents remain due and, so far as it appears at present, the emergency legislation does not prevent other methods of enforcement other than forfeiture; and does not prevent claims against guarantors, although things might change further over the next few weeks. Nor does it prevent exercising the procedures under the Landlord and Tenant Act 1954 or the serving of notices under that Act. It also doesn’t, it seems, affect terminating tenancies at will or operating contractual break mechanisms.

The right to forfeit for other breaches (e.g. use) would appear to be preserved, although there are many reasons why landlords will not want to exercise these rights for the moment and instead reach an accommodation with their tenants. It is in that context helpful that (absent an express waiver) doing so will now not result in the inadvertent waiver of the right to forfeit later on.

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