Government Measures to Ban Evicting Tenants of Residential and Commercial Property
By Hayley Grantham, Solicitor specialising in Property Disputes.
The Government has announced several new measures under emergency legislation aimed at protecting tenants of both residential and commercial property from being evicted as a result of the coronavirus pandemic. The Coronavirus Act 2020 came into force on 25 March 2020.
In order to protect residential tenants from eviction, the power of landlords to bring possession claims has been restricted. The key points to note are as follows.
- Under the new legislation the notice period that must be given by landlords before starting most possession claims between 26 March 2020 and 30 September 2020 has been increased to three months. Therefore, whilst ordinarily a possession claim on the ground of rent arrears could be brought on 14 days’ notice, landlords must now wait three months, and the usual two month notice period for no fault evictions has similarly increased to three.
- The legislation gives ministers the power to extend the notice period to six months if it is considered necessary.
- Whilst the legislation does not affect landlords who served notice before the legislation entered force, nor does it affect those seeking possession in cases where notice is not required, for instance against trespassers, under a separate measure the courts have imposed a general stay on all possession proceedings and evictions for 90 days from 27 March 2020. The effect of that is that landlords will not be able to obtain possession or even progress existing possession claims of any kind until at least 25 June 2020.
- It is important to remember however that any rent arrears or other tenancy breaches are not waived by these measures. If tenants fail to pay rent then, whilst they cannot be evicted for at least three months, they will still owe their landlord the rent at the end of that period.
- The Government has however said that it expects landlords and tenants to work together to establish an affordable repayment plan. Landlords will be expected to take advantage of buy to let mortgage payment holidays or any insurance policies in order to assist them.
Commercial tenants in England and Wales are also protected from eviction under the new legislation. That is no doubt a relief for many businesses due to pay quarterly rent bills on 25 March but will inevitably put landlords under pressure as their rental income drops sharply.
- Most leases provide that a landlord may forfeit a lease if rent is not paid within 14 or 21 days after the due date. Following expiry of this period, the landlord is entitled to take back possession (either by court proceedings or simply by changing the locks).
- The new legislation provides a moratorium period from 26 March 2020 to 30 June 2020 during which landlords cannot forfeit commercial leases on the ground of rent arrears. This applies to any rent, even if it fell due prior to the commencement of the moratorium.
- The definition of “rent” is wide such that the moratorium applies to all sums payable by a tenant under their lease including service charges, insurance premiums and landlord’s costs .
- It is crucial to note, though, that rent is not waived. It remains due and payable at all times. All that has changed is that landlords cannot exercise their usual right to forfeit a lease because of the arrears. They can however still take other action, such as bring a money claim in court or serve a statutory demand as a precursor to bankruptcy/insolvency proceedings. And they can still forfeit on grounds other than non-payment of rent, although note the point above that all court claims for possession have been stayed for 90 days, so any new claim would get off to a very slow start. Forfeiture by changing the locks would however still be possible.
- The moratorium expires on 30 June 2020 although it can be extended. Upon expiry, the landlord’s right to forfeit will be reinstated. Tenants will therefore need to be in a position to pay any accumulated rent arrears at that point. If they cannot then they will need to engage with their landlord at an early stage to try to agree a staged repayment plan so as to avoid forfeiture action. The courts will expect landlords to agree reasonable proposals and are unlikely to take kindly to forfeiture claims brought soon after the moratorium expiry without attempts to agree a repayment plan.
The Property Disputes team are available to advise on any questions you may have regarding the above measures and to provide tailored advice to meet your specific circumstances.
Read John Wagstaffe’s update on Possession Proceedings during the Coronavirus Pandemic.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.