14th Jul 2020

How does the Coronavirus Act affect landlords and tenants?

The Coronavirus pandemic has seen wholesale changes in the way we live and work. It has also seen the UK government take unprecedented actions which have affected a range of sectors.

The Coronavirus Act 2020 is just one of them and here I’ve taken a look at the changes to the Civil Procedure Rules upon Landlords and Tenants.  This note should not be considered as a substitute for legal advice, which you should obtain in every case. This note also reflects the Law in England only.

What is the Coronavirus Act 2020?

The Coronavirus Act 2020 (“CVA 2020”) received royal assent on 25th March 2020 and came into force on the 26th March 2020.  The effects of CVA 2020 are marked.  There are significant implications for landlords seeking to recover possession.

Practice Direction 51Z and the new CPR 55.29 stay (put on hold) "all proceedings for possession brought under CPR 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession".

The implications of the act

Just as the types of properties differ, so do the implications of the CVA 2020 for residential (explored in further detail here) and commercial properties (explained here).

In summary, CVA 2020,CPR 55.29 and PD51Z have the effect of extending the original stay of most possession proceedings up until the 23rd August 2020 or 30th September 2020, depending on the type of proceedings. This includes all possession proceeding brought under CPR part 55 and all proceedings seeking to enforce an order for possession by a warrant or a writ of possession. This applies to both Residential and Non-residential possession proceedings, including Mortgage possession proceedings.

The Court of Appeal has recently held, in TFS Stores Ltd v BMG (Ashford) Ltd and others [2020] EWCA Civ 833, that the stay imposed by PD 51Z applies to all possession proceedings, not just to those commenced under CPR 55. Possession proceedings commenced under alternative provisions in CPR 7, CPR 8 or by way of a CPR 20 claim will also be stayed under PD 51Z until 23rd August 2020 (or later, if the stay is extended further). Appeals arising from any of these possession proceedings will also be subject to the stay.  This is clearly an important decision for Landlords, mortgage lenders and Licensors alike.  It serves to underline the wide range of the stay imposed.

There are certain exceptions in relation to claims against trespassers and the making of interim orders and applications for case management directions.

Claims for possession can still be issued, but they cannot be progressed. Claims for injunctions are not affected.

The impact on residential landlords 

Residential Landlords face a difficult time by not receiving rent. Tenants face uncertain futures – there may be lack of security in the job market for residential tenants. Businesses are laying off staff, with more stories emerging on a daily basis.  This will undoubtedly have a knock on effect for residential landlords in due course.

The future for commercial tenants

Businesses which have the benefit of leases might be severely affected by the restrictions. Whilst Commercial Tenants are trying to hang on to their cash, their landlords need the rent to survive.

Online shopping was in the ascendancy prior to the pandemic and the lockdown restrictions have served only to accelerate that.  This means commercial tenants are increasingly looking to re-negotiate their leases, or even go online altogether.

There are undoubtedly some difficult negotiations ahead and Landlords may be faced with the uncomfortable reality of a re-negotiated lower rent, particularly in the light of a lack of retailers or commercial entities seeking to occupy those premises.

The recent collapse of INTU, owner of the likes of the Trafford Centre and the Lakeside complex, is a stark warning to commercial landlords. However, all landlords, residential, small commercial or international are having to adapt and face the changes which nobody could have foreseen.

We shall have to see how the situation develops and how the courts deal with changes in legislation and regulation, whilst seeking to deal with the inevitable backlog of possession claims.

Andrew Mawdsley is Head of Berwins' Dispute Resolution team. He is a Deputy District Judge and a highly experienced commercial litigation lawyer.

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