Insights Commercial Property Law – Key Considerations (February 2021)

The Covid-19 outbreak and the unprecedented requirement for social distancing continues to present never-before seen contractual issues and logistical problems in the property market, the majority of which will continue throughout 2021.

Our February 2021 summary of the latest developments in Property law and practice is as follows:

Following the High Court decision in Financial Conduct Authority v Arch Insurance (UK) Ltd and others [2020] EWHC 2448 (aspects of which are on appeal to the Supreme Court with judgment expected in January 2021), the Financial Conduct Authority has published a consultation document on guidance for policyholders, insurers and insurance intermediaries to assist all parties in making and dealing with claims under business interruption insurance policies, including the types of evidence and methodologies which policyholders may use when proving the presence of coronavirus in a particular area around their premises to support a claim. The deadline for comments on the guidance consultation closed on 18 January 2021.

The Ministry of Housing, Communities and Local Government has published a consultation document seeking views on a proposed new permitted development rights in England for a change of use from commercial, business and service use to residential. A new permitted development right would encourage greater residential use in town centres and urban areas, thereby attempting to reverse the decline of the high street in England. The consultation document also proposes amending existing permitted development rights to allow schools, colleges and universities, hospitals and prisons to expand and adapt existing buildings. The consultation closed on 28 January 2021.

The “relevant period” under Section 82 of the Coronavirus Act 2020 (or Section 83 in Northern Ireland), which is the period during which a landlord is restricted from forfeiting a commercial lease for non-payment of rent, has been extended to 31 March 2021. By way of reminder, Section 82 restricts the ability of a landlord to forfeit for non-payment of rent, whether by re-entry or by court proceedings. Rent, of course, remains payable, as does interest for unpaid rent, but the ability to forfeit on account of unpaid rent is removed. “Rent” includes “any sum a tenant is liable to pay under a relevant business tenancy”. Hence, service charges, insurance rents, default interest etc. are all within the scope of Section 82, as would seem to be the obligation of a tenant to replenish a rent deposit after the landlord has withdrawn from the account following default. Forfeiture for other breaches of covenant is not restricted.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No 2) Regulations 2020 (SI 2020/1483) have extended until 31 March 2021 the temporary provisions in Schedule 10 (Schedule 11 for Northern Ireland) of the Corporate Insolvency and Governance Act 2020, imposing restrictions on the use of statutory demands and on winding up proceedings and orders.

No new regulations have been introduced to deal specifically with the ability of a landlord to use CRAR (Commercial Rent Arrears Recovery). However, the extension of the “relevant period” under Section 82 Coronavirus Act 2020 impacts upon CRAR since the latest regulations published in September (The Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020 (SI 2020/1002)) continue to apply during the “relevant period”. Under the September regulations, during the “relevant period” (i.e. until 31 March 2020) in England and Wales, the minimum amount of net unpaid rent for the purpose of exercising CRAR is an amount equal to 366 days’ rent. Assuming there were no pre-2020 arrears of rent, this effectively means that CRAR is unavailable unless five quarterly advance rent payments (from March 2020 to March 2021 – both dates inclusive) are left unpaid.

New powers have been given to local authorities in England under the Health Protection (Coronavirus, Restrictions) (Local Authority Enforcement Powers and Amendment) (England) Regulations 2020 (SI 2020/1375) to enable local authorities to enforce restrictions more effectively, imposed on businesses during the COVID-19 crisis and to assist in maintaining COVID-secure environments. These powers enable local authorities to serve notices upon business owners and occupiers. The notices are:

  • Coronavirus Improvement Notices, where a business is failing to fulfil a provision set out in relevant coronavirus regulations.
  • Coronavirus Restriction Notices, where there has been a breach of the provisions of the relevant coronavirus regulations and a failure to comply with a Coronavirus Improvement Notice, and non-compliance creates a risk of exposure to coronavirus.
  • Coronavirus Immediate Restriction Notices, requiring immediate closure of premises or restriction of activities to stop the spread of the virus, without the need first to serve a Coronavirus Improvement Notice.