Commercial Property - Waiving the Right to Forfeiture and the Coronavirus Act 2020
- AuthorJonathan Flynn
Most commercial leases enable a landlord to terminate a lease by forfeiture if the tenant breaches its obligations. Once the right to forfeit the lease has arisen, if the landlord acts in such a way so as to treat the lease as continuing it can lose the right to forfeit the lease which is known as waiving the right to forfeit.
The act of demanding and/or accepting rent is considered to be consistent with the continued existence of a lease and therefore sufficient to amount to waiving a right to forfeiture. Any attempt by a landlord to reserve the right to forfeit a lease is irrelevant. Landlords must therefore take great care when dealing with a tenant’s breach so as to ensure they do not jeopardise an opportunity to forfeit the lease.
Waiver will occur where the landlord:
- Is aware of the tenant’s breach
- Does an unequivocal act which recognises the lease as continuing
- Communicates that act to the tenant
A tenant’s breach will either be considered to be a continuing breach or alternatively, a ‘once-and-for-all’ breach. If a tenant’s breach is a ‘once-and-for-all’ breach, a landlord’s right to forfeit the lease will be lost upon waiver. This is not however the case for a ‘continuing breach’ where the right to forfeit will arise each day the breach arises. Therefore, whether a tenant’s breach is categorised as a continuing breach or a once-and-for-all breach will have important consequences for the manner in which the landlord can pursue the breach.
Importantly, the recent outbreak of Coronavirus has seen the introduction of the Coronavirus Act 2020 which brings with it emergency measures which concern commercial tenancies. These measures will be in place until 30 June 2020 (or such later date as may be specified by the Secretary of State or the Welsh Ministers).
The Act provides that no conduct by or on behalf of a landlord during the relevant period (26 March 2020 to 30 June 2020), other than giving an express waiver in writing, is to be regarded as waiving a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent. For the purposes of the Act, rent includes any sum a tenant is liable to pay under a relevant business tenancy. Accordingly, it would appear that landlords can, for the time being, pursue their tenant’s for failing to pay rent without worrying that their conduct will prejudice or jeopardise their right to forfeit the lease. This is, of course, providing that landlords do not expressly waive their right to forfeit in writing.
Commercial landlords and tenants should be aware that the relevant period may be extended beyond 30 June 2020 by the Secretary of State or the Welsh Ministers (and that power may be exercised on more than one occasion so as to further extend the period). It is important therefore that commercial landlords and tenants keep up to date with these measures so as to ensure they are not caught out in the future.
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