COVID-19 – FAQs for Landlords and Tenants in the United Kingdom - McDermott Will & Emery

COVID-19 – FAQs for Landlords and Tenants in the United Kingdom

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A number of important questions arise for landlords and tenants following the series of Coronavirus (COVID-19) emergency measures the UK government introduced on 25 March 2020 under the Coronavirus Act 2020.

Read on for our answers to some of the most important questions.

In Depth

1. Are business and residential tenancies affected by the new COVID-19 measures?

Yes. In the case of business tenancies, landlords will be unable to forfeit a lease and commence possession proceedings if a tenant fails to pay rent (or other sums, including service charges and insurance rent) until 30 June 2020.

In the case of residential tenancies, landlords will be required to give at least three months’ notice for any notice seeking possession or notice to quit until 30 September 2020.

These dates are subject to review and may be extended. It is not thought that these suspension and notice provisions afford protection to all those occupying premises pursuant to licences or general commercial contracts.

2. Is a tenant therefore entitled to withhold rental payments in the next three months?

No – unless the terms of the lease allow the tenant to withhold payment of rent. Therefore, although it will be rare for a tenant to be entitled to withhold rent as a direct result of COVID-19, it is important that tenants (or their solicitors) carefully review their leases (and ancillary documents) to confirm the position.

It is also important to note that although landlords are prevented from bringing possession proceedings in at least the next three months, rent will continue to accrue (with interest) during this period. As the legislation currently stands, landlords can bring proceedings for non-payment of rent after June (in the case of business tenancies) or September (in the case of residential tenancies) in circumstances where rent arrears remain outstanding.

Tenants may request rent review/deferral talks with landlords to reduce the likelihood of rent disputes in the aftermath of the current pandemic. If so, landlords and tenants should ensure that any agreement is documented so as to be legally binding.

3. As a landlord, do I have to waive rent during the COVID-19 outbreak?

No. Landlords are under no legal obligation to waive rent during these unprecedented times – in most circumstances, tenants will continue to pay rent in accordance with their lease. However, there is no “one-size-fits-all” approach, and landlords should engage in productive discussions with tenants to ensure rent is paid or that alternative arrangements are in place when rent falls due.

Both landlords and tenants should review their insurance policies to offset the risk caused by business interruption or loss of rent as a result of COVID-19.

4. Can I evict a tenant if I have already served on them notice of possession proceedings?

No. A notice will not usually be sufficient to evict a tenant; a court order or warrant is required. The UK government has suspended existing notices seeking possession until 30 June 2020 for business tenancies, and for 90 days from 27 March 2020 for residential tenancies.

These dates are again subject to review and may be extended.

5. What can I do if I am struggling to make my mortgage repayments because of COVID-19?

Some mortgage lenders have agreed to offer payment holidays of up to three months to residential homeowners and buy-to-let landlords. In general, the payment holiday will work by the usual monthly payments changing to zero and interest accruing for that period.

Banks have yet to specifically commit to providing payment holidays to all landlords of commercial property, but each application will be assessed on a case-by-case basis. Borrowers should discuss the specific details of their payment holidays with individual mortgage lenders.

6. How will COVID-19 alter my repair obligations under the lease?

It will not. The emergency COVID-19 measures do not alter a tenant’s or landlord’s existing repair obligations under a lease. Repairs should therefore be carried out where necessary if required under the lease. However, in accordance with the published guidance for landlords and tenants, residential landlords should only carry out repairs when urgent and should ensure that they take all the necessary precautions to keep safe (including ensuring compliance with occupational health and safety requirements).

If a tenant or landlord is unable to meet their repair obligations, it will be best practice to engage in productive talks with the other party as soon as reasonably possible. There is no legal safeguard that prevents a landlord or tenant from bringing proceedings against the other for unreasonably refusing to comply with their contractual obligations in the aftermath of the pandemic.

Nonetheless, commercial landlords should be aware of the restrictions placed on them by the Leasehold Property (Repairs) Act 1938. Under the 1938 Act, an action for damages for a tenant’s failure to meet their repairing obligations can only be brought if a landlord gives the tenant at least one months’ notice that complies with the statutory requirements. The 1938 Act will apply to all leases for a term of not less than seven years, provided there are three years or more to run from the date damages proceedings are commenced.

The government has not introduced further legislation to change this provision or similar provisions in light of COVID-19.

7. Am I still required to comply with my health and safety obligations?

Yes. Landlords and tenants still must comply with their health and safety obligations under the law. For example, landlords must provide tenants with all necessary gas and electrical safety certifications at the beginning of a tenancy, while some tenants who are employers will have an implied duty of mutual trust and confidence to their employees. Additional health and safety obligations may of course exist under the lease itself, none of which are diluted by the COVID-19 crisis.

That said, when complying with their contractual or statutory health and safety duties, landlords should act in accordance with the published guidance on social distancing and ensure that they take all the necessary precautions to keep safe. If a landlord or tenant is unable to meet their obligations they should document this in writing and engage in productive talks with those to whom the duty is owed. Failure to comply with these requirements can have serious consequences.

8. As a landlord, am I required to provide additional cleaning facilities during the outbreak?

No. There is no legal obligation for landlords to provide additional cleaning services due to COVID-19. Nonetheless, some landlords have taken proactive steps to do so (such as installing additional washing facilities or increasing the frequency of cleaning services) to ensure the safety and wellbeing of their tenants.

Commercial landlords who choose to provide additional cleaning services should be aware of existing service charge provisions to determine if they can recoup the reasonable costs of enhanced cleaning services.

9. Can I argue that COVID-19 frustrated my lease?

The COVID-19 outbreak is unlikely to be a frustration event. The bar is high – a person must show that the lease obligations are now impossible to perform because of the disease, or that such obligations are radically different to those contracted to. It will not be enough to show that the lease has become harder to perform because of financial difficulties or temporary disruption. Although it is unknown when the lockdown will end, COVID-19 is unlikely to result in tenants being permanently unable to occupy their premises.

10. Is COVID-19 a case of force majeure?

Force majeure provisions are uncommon in leases (they are more commonly seen in agreements for a lease, or building contracts), and in any event disputes will be assessed on a case-by-case basis. Should a lease contain a force majeure provision, it may potentially be possible for landlords or tenants to avoid their contractual obligations by relying on such clauses; however this will need to be an express provision, and much will depend on the drafting (e.g., specific reference to a pandemic). For example, landlords may try to rely on this type of clause to relieve themselves of their obligations to provide services where it is not reasonable to do so.