What are a landlord’s options when a commercial tenant, with an excluded tenancy, is unable to leave at the end of the tenancy due to the current coronavirus (COVID-19) pandemic?

What are a landlord’s options when a commercial tenant, with an excluded tenancy, is unable to leave at the end of the tenancy due to the current coronavirus (COVID-19) pandemic?

Commercial tenancy

The tenant will need to have regard to:

• any legislation requiring closure of premises or restricting movement that is in force and the potential for this to become more restrictive

• any practical issues, for example the availability of any necessary contractors and the need to plan for the possibility that the relevant people may be unable to attend due to developing coronavirus (COVID-19) symptoms or being otherwise required to self-isolate

• its responsibilities to its employees and any contractors who will carry out the necessary work to vacate. In particular, the tenant should comply with the guidance for employers and businesses on coronavirus issued by the government

For further information, see Practice Note: Coronavirus (COVID-19)—implications for property, in particular section: Closure of premises and businesses—regulations under Public Health (Control of Disease) Act 1984.

However, it would appear strongly arguable that the regulations do not change a tenant’s obligation to vacate following expiry of its lease. See Q&A: Is there any guidance for UK commercial tenants who need to fulfill break option obligations by vacating premises during the current coronavirus (COVID-19) restrictions?

While the landlord of an expired Landlord and Tenant Act 1954 (LTA 1954) contracted out lease would be entitled to take back possession of the property and change the locks upon the expiry of the lease, they may prefer to begin court proceedings for a possession order, particularly in the context of the current coronavirus pandemic—otherwise, careful consideration would need to be given to whether or not re-entry is compliant with any legislation restricting movement, etc.

In this situation, as the tenant is in residential occupation of the premises (see further below), the landlord cannot take back possession by re-entering in any event due to statutory restrictions which must be considered:

• under section 6 of the Criminal Law Act 1977 (CLA 1977), it is a criminal offence to threaten or use force to gain entry when someone is physically at the premises and opposes re-entry

• under section 2 of the Protection from Eviction Act 1977 (PEA 1977), it is unlawful to peaceably re-enter a dwelling while someone is lawfully residing at the premises. For more detailed guidance on PEA 1977, see Practice Note: Protection from eviction and protection from harassment

Accordingly, the landlord will need to issue possession proceedings—in respect of which, see Practice Note: CPR 55 procedure in relation to commercial property.

However, from a landlord’s perspective, its remedies are constrained by CPR PD 51Z, under which 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 are stayed for a period of 90 days from 27 March 2020 due to the pandemic. Note that claims for injunctive relief are not subject to the stay.

CPR PD 51Z has been amended with effect from 18 April 2020 to clarify that the stay does not apply to claims against trespassers (to which CPR 55.6 applies—ie ‘persons unknown’) or to applications for, or the making of interim possession orders. However, in this case, the commercial tenant, while they would be trespassing following the expiry of a lease contracted out of LTA 1954, is not a ‘person unknown’ and therefore the stay would apply to the possession proceedings.

In addition, it has been confirmed that CPR PD 51Z does not preclude the issue of possession claims, but merely stays them, and the parties to a possession claim may seek case management directions from the court where these are agreed by the parties.

Accordingly, if possession proceedings were issued, they will be stayed for 90 days from 27 March 2020. For more information, see Practice Note: Coronavirus (COVID-19)—implications for property.

Residential occupation

It is unclear whether the tenant’s occupation of the commercial premises is lawful (and presumably encompassed in the commercial lease) or unlawful.

Assuming that it is lawful, it arguably will be excluded from the residential security of tenure under the Housing Act 1988 (HA 1988) on the basis that, presumably, the commercial tenancy is one to which LTA 1954, Pt II applies (see Practice Note: LTA 1954 business lease renewal—termination), albeit the tenancy is contracted out of LTA 1954, ss 2428 (HA 1988, Sch 1 Pt I, para 4). For further information on residential lettings, see Practice Notes: Assured and assured shorthold tenancies—granting and Residential tenancies granted to companies.

As set out above, peaceable re-entry cannot be used in the context of lawful residential occupation, and therefore, possession proceedings are required as set out above (which will be stayed upon issue).

If the residential occupation is unlawful, it will still be preferable to issue possession proceedings in respect of both the commercial and unlawful residential occupation as it may be a breach of CLA 1977 to take back possession by re-entering (in the event the re-entry is even possible at present).

New lease

Subject to all of the terms of the lease in question, it would seem likely that the landlord would be bound by a lease which had been granted to a third party tenant to commence on expiry of the existing tenant’s lease. Accordingly, the new tenant may have a claim against the landlord in the event that possession cannot be delivered up at the term commencement (likely for damages, or possibly for repudiatory breach). For more information, see Practice Notes:

• Concurrent and reversionary leases

• Liability for breach of property contract after completion

• Contractual damages—general principles

Accordingly, it may be prudent, on a without prejudice basis, to enter into discussions with the new tenant as early as possible in order to put them on notice as to the issue and try to reach a negotiated settlement, such as a postponed commencement date for occupation unless and until possession has been obtained.

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