Covid-19: Landlord & Tenant Update
June 26, 2020
The Civil Procedure (Amendment No. 2) (Coronavirus) Rules 2020 are coming into force on 25 June 2020. These introduce paragraph 55.29 to the Civil Procedure Rules, which stays all proceedings stayed immediately prior to the rule coming into force and all those issued subsequent to 25 June 2020 until 23 August 2020.
In practical terms this means that those seeking an Order for Possession from the Courts, whether residential or commercial property, will be able to continue to issue possession proceedings but they will then be automatically stayed until 23 August 2020.
Claims for possession against trespassers are excluded from the stay. These are still being processed and heard relatively quickly.
Forfeiture of Commercial Property
Section 82 of the Coronavirus Act 2020 prevents Landlords from re-entry or forfeiture under a business tenancy for non-payment of rent throughout the relevant period. The relevant period initially ended on 30 June 2020. However, Section 82 (12) allowed for this period to be extended. The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2020 come into force on 29 June 2020 and extend the Relevant Period under s82 of the Coronavirus Act 2020 to 30 September 2020.
This means that Commercial Landlords will not be able to re-enter and forfeit Leases for non-payment of rent until after 30 September 2020. Rent arrears and interest continue to accrue during this period though, unless and alternative agreement is reached. Re-entry is only prohibited in relation to rent arrears, not other breaches of a lease. However, it should be noted that s82 defines rent widely to encompass most payments that might fall due under a lease.
Corporate Insolvency and Governance Bill
The House of Lords have returned the Bill to the House of Commons with amendments. It is anticipated that it will be passed soon as it is in the final stages now. This Bill provides for a moratorium to buy companies some breathing space before a creditor can wind them up or take other actions against them as a result of them being unable to temporarily meet their debts.
Although the Bill has not yet been passed, parties should be mindful of the ruling of Morgan J in A Company (Injunction to Restrain Presentation of Petition)  EWHC 1406 (Ch) in which he chose to grant the injunction by reference to the anticipated Bill being passed. Given this decision, there would appear to be little point in issuing either statutory demands or winding up petitions in respect of rent arrears that have accrued as a result of the pandemic at this time.
Commercial Rent Arrears Recovery
At present 90 days rent arrears are required and the standard the process is of little practical benefit, particularly as agents are still restricted from enforcement due to social distancing requirements being in place.
For Landlords seeking some security in respect of a staged payment plan, it is possible to put in place a CRAR Protective Warrant of Control. A Protective Warrant binds the tenant to a statutory process and law in respect of the payments. It gives the Landlord protection and protects the tenant from third-party enforcement action in relation to those goods. Giving both parties peace of mind. The fees are also substantively less than those usually charged in relation to the standard CRAR procedure.
It is still possible to issue and progress debt claims. However, the Courts are taking longer than usual to process claims and cases are backing up. Where we can get judgments through, bailiffs/HCO are restricted at present due to social distancing guidelines. They can only write and call repeatedly until the restrictions lift. A better approach may be to use the Court process to obtain information from debtors on assets and other interests, opening up other options to enforce. However, there is still an issue as to how quickly the Court can process these applications.
Where it is not possible to obtain a Possession Order, we are seeing more cases of applications for prohibitory and mandatory injunctions. Whether this remedy is available will depend on the specific circumstances of the breach. In residential property, a possession order will still be required in order to enforce eviction of a tenant. However, an injunction may bring matters to a head and persuade a tenant who is proving difficult to voluntarily surrender the property.
In respect of commercial property, there are self-help remedies available in many Leases in respect of disrepair. Where there are other breaches, Landlords may still serve a s146 Notice or consider injunctive action in more serious cases.