Business and residential tenant protections: the latest government guidance explained

The government is asking for landlords to show compassion at this time and to allow tenants who are affected to remain in properties wherever possible.

Daniel Thomas | Partner and Head of Litigation

By Daniel Thomas, Partner and Head of Litigation

As many landlords and tenants will know, today (25 March 2020) is Quarter Rent Day which means many quarterly paying tenants will be required to make payment in accordance with their lease obligations today.

However, since coronavirus started to spread throughout the UK and officially declared a pandemic by the World Health Organisation, the government has introduced legislation and advice on all areas of our life, from limiting where we can go to protecting people who have mortgages to pay and supporting renters who may not be able to keep up with payments.

With everything being announced at the moment, it can be difficult to know what to do either as a tenant or a landlord in uncertain situations like this.

What are the latest measures announced by the government?

  1. Business tenancies

Although much has been documented about protection relating to residential tenancies, the Coronavirus Bill (“the Bill”) also provides protection for business tenancies and sets out that:

  1. A right of re-entry or forfeiture for non-payment of rent may not be enforced, by action or otherwise; and
  2. No conduct by (or on behalf of) a landlord, other than giving an express waiver in writing, is to be regarded as waiving a right of re-entry of forfeiture for non-payment of rent.

These protections apply to any tenancies to which part 2 of the Landlord and Tenants Act 1954 applies. The protections will last for the period from the day the Act is passed and end on 30 June 2020 or any later date which the protections are extended to by the government.

Any order which is made by the High Court during this time or any High Court proceedings which started before this period to enforce right of re-entry or forfeiture, must ensure that the tenant does not have to give possession of the property to the landlord before the end of the period.

It is worth noting that the Bill only seems to address forfeiture for failure to pay rent, it does not appear to stop landlords from recovering rent by other means, such as the issue of a money claim or insolvency. The Bill clearly seeks to maintain the status quo and therefore historic conduct will likely form part of any negotiation between landlord and tenant and/or determination by a court.

  1. Residential tenancies

The latest government guidance in relation to residential tenancies include:

  1. The government has extended notice periods to 3 months
  2. 3-month mortgage payment holidays will be extended to those landlords whose tenants are suffering financial difficulties in this time.
  3. The government have extended the pre-action protocol on possession proceedings to include private renters to strengthen its remit.

These protections will apply for any notice which is served whether it is a Section 21 Notice (without reason) or Section 8 Notice (rent arrears), this is expected to last until at least 20 September 2020.

This means if a tenant falls behind in their rent payments over the next few months, landlords cannot evict tenants from their properties immediately.

To follow the pre-action protocol, landlords must ensure that they take steps to communicate with any tenants and make sure they understand any documents being served on them. They should avoid taking court action while a settlement out of court is still being actively pursued.

If these steps are not followed, the courts can strike out claims, adjourn claims, or make an order for costs.

In conclusion…

The general advice from the government is to communicate and work out payment plans or payment breaks if a tenant is having trouble. Once the crisis is over, landlords are expected to work with tenants to find payments plans that will work for them taking into account tenants’ individual circumstances.

The government is asking for landlords to show compassion at this time and to allow tenants who are affected to remain in properties wherever possible.

Although the government guidance is clear that dialogue should be entered into in relation to any arrears or potential difficulties, it would be wise to ensure that any revised terms or agreements are appropriately documented. Some practical steps could be looked into to defer rent, negotiate monthly payment terms or to agree a temporary rent reduction.

It is, of course, always important for a landlord to ensure that a tenant is not simply taking advantage of a current situation, but each circumstance must be dealt with on an individual basis, with compassion and common sense.

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