Lawbite: Protection from Irritancy extended

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate litigation - LawBite

06-10-2020

Coronavirus (Scotland) Acts (Amendment of Expiry Dates) Regulations 2020 (SSI 2020/299)

Both the UK and the Scottish Government introduced measures to give private and business tenants temporary protection from eviction and irritancy during the Covid-19 pandemic. These included the extension of the notice period which a landlord is required to give before a lease can be irritated (terminated) for non-payment. The Coronavirus (Scotland) Act (the “Act”) came into force on 7 April 2020. Originally having effect until 30 September 2020 the legislation has been extended by the Coronavirus (Scotland) Acts (Amendment of Expiry Dates) Regulations 2020 (SSI 2020/299) and will now remain in force until 31 March 2021 unless further extended or ended early.

What can’t a commercial landlord do?

Prior to the Act coming into force, if a tenant failed to pay rent or other sums such as service charge due under a lease in Scotland, the landlord could terminate the lease as long as it gave the tenant at least 14 days’ notice of the arrears and provided the tenant did not then pay the arrears within that period. The minimum period has been extended by the Act to 14 weeks. This means that while the legislation remains in force a landlord will not be able to irritate a lease on the grounds of arrears unless the tenant has been given 14 weeks’ notice. The legislation does not take away a landlord’s right to irritate, it just effectively suspends it meantime for this specific breach.

The Corporate Insolvency and Governance Act 2020 also temporarily limited a landlord’s ability to use statutory demands or winding-up petitions to recover sums due under commercial leases. This protection for tenants (and in fact all creditors) was extended by The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 which came into force on 29 September 2020. Creditors now cannot present a winding-up petition based on a statutory demand issued between 1 March and 31 December 2020. Winding-up petitions presented on other grounds between 27 April and 31 December 2020 will only be successful if it can be shown that COVID has not affected the debtor or that the debtor would be in the same position even if COVID had not had a financial effect on it.

What can a commercial landlord do?

The new legislation does not provide a rent holiday it is purely a temporary postponement of the landlord’s right to irritate a lease for non-payment.  As such, in the absence of agreement to the contrary all rent and other sums remain fully due, demandable and payable.  Interest on outstanding sums also continues to accrue.

The landlord’s remaining remedies are largely unaffected. These include calling on rent deposits, pursuing guarantors, suing for the unpaid sums, irritating a lease for non-monetary breach (subject to the usual tests being met) and demanding rents or any other sums.

Given that COVID-19 continues to pose an unprecedented threat to the whole real estate market, it is unlikely many landlords were planning to irritate purely for non-payment in any event. The extension to the Act means that unless there is an early expiry statutory instrument passed or a statutory instrument reducing the time period of 14 weeks incrementally, the 14 week period for irritancy will remain until at least 31 March 2021. Further extensions are permitted by the Act but only up to 30 September 2021.