The impact of Coronavirus on property law
Since lockdown was initiated on 23 March 2020, the Government has implemented a range of measures designed to minimise the economic impact of Coronavirus, which otherwise could have led to a substantive economic meltdown.
The Coronavirus Act 2020 (“the Act”) which came into force on 26 March 2020 has been described by some commentators as timid. Leaving aside morality and the potential damage to reputation, were landlords to act robustly to protect their legitimate legal and business interests; the potential insolvency of tenants and the consequent difficulty of identifying prospective new tenants prepared to take on leases on the same/similar terms poses considerable challenges for landlords.
Despite that, landlords and tenants need to consider their positions and in doing so, need to be aware of a number of major changes to the legal landscape. These changes have evolved since 26 March, in some cases repeatedly.
I try to simplify and summarise the practical impact of the legal position below, but strongly recommend that you obtain specific legal advice before taking action as this is not an exhaustive guide and does not therefore cover the full minutiae of the provisions and, as always, each case turns on its own facts.
The Act’s Intent re the Property Sector
- Designed to prevent residential or commercial property meltdown, it prevents landlords from evicting residential tenants or forfeiting commercial tenancies.
- The technical nature of property law meant that given the (necessary) haste of the Act’s implementation, there have been technical issues to resolve thereafter.
This is not only covered by by Section 81 and Schedule 29 of the Act but also addressed by Practice Direction 51Z of the Civil Procedure Rules 1998 (“the CPR”), which came into force on 27 March 2020. It was later amended/clarified by Practice Direction 51ZA.
- 3 months’ notice required for a notice to quit for any tenancy, in the case of any alleged breach of covenant, until 30 September 2020.
- A temporary hold on all possession claims that were already commenced and any eviction action in the case of enforcement, for 3 months, effectively until 28 June 2020.
- Nonetheless the Government expressly retained scope for injunctive applications and as recent case law has proven, in exceptional circumstances, these can permit a property owner to require an occupier to leave a property, or face potential imprisonment for contempt of court.
- So although the back door was left open, there was on the face of it at least, a blanket prohibition on any possession claim, or eviction enforcement, against any tenant (or occupier) until 28 June 2020, no matter how unreasonable the tenant’s/occupier’s behaviour may have been. Some called this a licence to trespass…
- Amended so that trespassers could be evicted and without the need for 3 months’ notice.
- Amended to permit Interim Possession Orders.
- Importantly, we are now told by the Housing Secretary, Robert Jenrick, (how else but by Twitter) that the initial period for the temporary hold has now been extended by 2 months. Although this announcement has yet to be reflected in the CPR, it seems landlords will not be able to evict tenants/occupiers, who initially entered the property with consent, until 28 August 2020 at the earliest. That is the case whether they have failed to pay rent or are in breach of other tenant covenants.
- Section 82 of the Act prohibited forfeiture for non-payment of rent (and other sums including insurance, service charge and VAT) by way of a moratorium but still allowed landlords to forfeit for breach of other tenant covenants provided it was in connection with a Section 146 Notice.
- Similarly landlords could commence a County Court claim, present a winding up petition (or bankruptcy petition in the case of an individual) or pursue commercial rent arears recovery (CRAR).
- Similarly this was only intended to be until the end of June 2020.
- Despite the residential extension, it is as yet unclear whether this will be extended to 28 August 2020 in the case of commercial property leases, however, it is likely to be the case.
- CRAR extended from the usual 7 day arrears requirement to a 90 day requirement, but otherwise remaining available.
Practise Direction 51ZA allows parties to existing Court proceedings to extend deadlines by up to 56 days rather than the usual 28 days.
The Court will also accept applications from parties who agree directions for existing possession proceedings, notwithstanding the stay currently in place.
There are provisions in place to prevent a landlord from waiving its right to forfeit, in relation to non-payment of rent (taken to include insurance, service changes and VAT) however, a landlord can still do so in relation to breach of other tenant covenants, by demanding rent.
Mark Wrinch is a solicitor specialising in dispute resolution in the Business Services Team at Barker Gotelee Solicitors.