Property Litigation Column: Preparing For The End Of Section 82 Of The Coronavirus Act 2020: Non-Protected Rent Debts

• Published date: 24 May 2022
• Subject Matter: Real Estate and Construction, Real Estate, Landlord & Tenant - Leases
• Law Firm: Gatehouse Chambers
• Author: Gatehouse Chambers

Andy Creer considers issues on forfeiture and waiver in respect of non-protected commercial rent debts, with the "relevant period" ending on the March quarter day.

The end of section 82 of Coronavirus Act 2020

As will be well-known to anyone in the commercial landlord and tenant sector, for almost two years, landlords have been unable to exercise a right of re-entry in respect of a business tenancy for non-payment of rent (section 82(1), Coronavirus Act 2020 (CVA 2020)), but have not had to worry whether their conduct might be regarded as waiving that right (section 82(2), CVA 2020).

The Commercial Rent (Coronavirus) Bill (Bill) is currently in the report stage in the House of Lords and due to be considered on 14 March 2022. While it is intended to introduce a compulsory arbitration scheme for "protected rent debt" where a tenancy was "adversely affected" by COVID-19, some rent arrears will fall outside of the scheme, for example:

• Where the tenant was already in arrears before 21 March 2020 (the start of the protected period).
• Where the arrears have accrued after the "protected period" in the Bill (that is, after 18 July 2021 in England and 7 August 2021 in Wales).
• Where the business or premises were not subject to a closure requirement in that protected period.

Consideration for landlords

As will be familiar to both landlords and tenants alike, the failure to pay rent is a "once and for all" breach, such that any subsequent affirmation of the lease with knowledge of that breach will waive the right to forfeit (London & County (A & D) Ltd v Wilfred Sportsman Ltd [1971] 1 CH 764).

Until the expiry of the relevant period on the March quarter day a commercial landlord can only waive a breach for non-payment of rent expressly in writing (section 82(2), CVA 2020). But what happens next?

After 25 March 2022, the common law position will be restored, and a landlord will not be able to accept rent on a "without prejudice" basis (Matthews v Smallwood [1910] 1 Ch 777). As the law currently stands (following Segal Securities Ltd v Thoseby [1963] 1 QB 887) the demand or acceptance of rent will waive the right to forfeit. (Some commentators have questioned whether this should be the case with a demand, but that is a debate for another day.)

Acceptance of the March quarter's rent after 25 March, when the section 82(2) of CVA 2020 exception will no longer apply, but before the right of re-entry arises (usually 14 or 21 days later) will waive the right to forfeit for...