by Claire Miller – Partner, Head of Property, Penman Sedgwick LLP
In my previous columns I have touched upon the impact the pandemic is having on the provisions in many commercial leases relating to payment of quarterly rents, and also the changing occupational requirements of some commercial tenants. In this column I refer to the moratorium created by the Coronavirus Act 2020, which prevents a landlord from enforcing a failure to pay rent (which for these purposes includes service charge and insurance contributions due under the lease) through forfeiture or re-entry.
It is important that tenants understand that this moratorium does not suspend their obligation to pay rent, in the absence of an express agreement with the landlord providing for a rent suspension or rent reduction – as to which please refer to my first column. However, the tenant is protected to an extent, as the landlord cannot recover possession during the moratorium period (which has been extended to 30 September 2020) where the right to re-enter is due to non-payment of rent. That said, tenants should note that the landlord will still have other remedies available which might include:
- drawing down on a rent deposit (which the tenant will then be liable to top up)
- claiming against the tenant’s guarantors(s)
- exercising commercial rent arrears recovery (CRAR) – although the minimum net unpaid rent that must be unpaid before CRAR may take place has been increased to an amount equivalent to 189 day’s rent
Non-payment of rent might also impact on the tenant’s ability to exercise a break clause in the lease, if it is a condition of the break clause that the rent must be paid up to the break date. The moratorium under the Act does not override contractual conditions such as this, which must be followed strictly for the break right to take effect unless the landlord waives the relevant condition.
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