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Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction.
Emergency protection for businesses
In order to protect business tenants in Northern Ireland from the threat of having their leases forfeited for non-payment of rent during the COVID-19 pandemic, provision has been made under The Coronavirus Act 2020 which came into force on 25 March 2020.
How long does the protection last for?
No business will be forced out of their premises during the relevant period for non-payment of rent. The protection for tenants unable to pay their rent due to the impact of COVID-19 is up until at least 30 June 2020, and there is provision for extension of this date by the Department of Finance in Northern Ireland.
What does this mean practically?
The provision will only delay the right to forfeiture – it will not affect a landlord’s right to issue proceedings for forfeiture or recovery of rent after the relevant period ends. Rent is defined under the Bill as any sum payable under the business tenancy including insurance, service charges and interest. There is no requirement in the Act for any arrears of rent accrued throughout the relevant period to be written off by landlords.
Any failure to pay rent during the relevant period will be disregarded for the purposes of Article 12(1)(b) of the Business Tenancies (Northern Ireland) Order 1996. This means that at the end of the term of the lease, a landlord shall not be able to oppose the grant of a new lease, on the ground that the Tenant did not pay rent during the relevant period.
What about breaches other than non-payment of rent?
The provision only relates to breaches by way of non-payment of rent – if a tenant commits another breach of lease terms, then the protection afforded under the Act does not apply.
What about protection for Landlords?
At the time of writing, the government has said that it will monitor the impact on commercial landlords’ cash flow and “continues to be in dialogue with them”, with industry bodies calling for more support for landlords during this uncertain time.
Sensible steps to be taken?
For those Tenants who pay rent quarterly, the likely next payment date will be 1 May 2020. Many landlords and tenants are already having conversations and reaching voluntary arrangements about rental payments in the coming months. However, it is important that any such arrangement is sufficiently documented to ensure that each party’s interests are sufficiently protected. It may be that a formal Deed of Variation is not required and any agreement can be documented by way of a well drafted side letter.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. If you are a commercial landlord or tenant requiring more information in relation to the new provisions, contact our Commercial Real Estate team. We will be able to explain your legal rights and obligations, and discuss any other practical measures depending on your circumstances.