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Coronavirus – Implications for Real Estate Litigation

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30th March 2020

This briefing document aims to provide an overview of the impact of the Coronavirus Act on real estate litigation; in particular on commercial and residential property and on court procedure.

Commercial

Coronavirus Act 2020, section 82:

The relevant provision is section 82 of CA20.

A commercial lease will usually include a clause allowing the landlord to re-enter and so forfeit the lease if rent is unpaid for a set number of days after becoming due. Until that date has expired there is no right to re-enter for non-payment of that instalment of rent.

The forfeiture moratorium under the CA20 provides that a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, during the relevant period.  The relevant period is the period starting the day after the Act receives the Royal Assent and ending on 30th June 2020. The end date may be extended, presumably this will happen if the situation does not improve by then or if for economic reasons it is considered that businesses need more time.

These provisions apply to a relevant business tenancy, which means — (a) a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies, or (b) a tenancy to which that Part of that Act would apply if any relevant occupier were the tenant.

It is thought that a “contracted out” lease is still a tenancy to which Part 2 of that Act applies given that section 38 provides that the effect of contracting out is only to disapply certain sections of Part 2 (sections 24 to 28).

“Rent” includes any sum a tenant is liable to pay under a relevant business tenancy. That would include service charges and insurance rent.

The moratorium does not (a) stop rent accruing or (b) prevent a right of re-entry arising. If during it rent remains unpaid for the requisite period a right to re-enter will arise but the landlord will not be able to enforce it.

When the moratorium ends, if a right of re-entry has arisen during the moratorium, then the landlord will be able to immediately take steps to enforce the right to re-enter i.e. to forfeit the lease.

In that sense the moratorium is a breathing space, not a solution for tenants.

Furthermore, forfeiture is an alternative to other remedies available to the landlord. Alternative remedies include commercial rent arrears recovery, service of a statutory demand, recourse to a rent deposit, court action to recover rent and action against a guarantor.  None of these are impacted by these provisions.

Residential

Summary:

• All possession hearings have been suspended for 90 days;
• new notices served with the object of obtaining possession will have an inbuilt delay of three months, thus delaying a landlord from obtaining possession;
• Government advice on completion of sale and purchase

Possession proceedings: New PD51Z

By way of Practice Direction 51Z, the Master of Rolls has suspended all ongoing housing possession actions, so that no hearing can progress to a stage where an individual can be evicted.  This applies to occupation in the private and public sector, including licenses and mortgagee cases.  This has been put in place for an initial period of 90 days, up to the end of June 2020.

Terminating Tenancies

Assured Tenancies, section 8 procedure:

The relevant provisions are section 81 and Schedule 29 of CA20.

Landlords seeking to obtain possession of an assured tenancy for cause, have to first serve a notice under section 8 of the Housing Act 1988 on the tenant setting out the grounds relied on.

Previously, section 8, specified varying periods within which proceedings could be brought following the service of a section 8 notice, which depended on the particular ground relied on.  Now, pursuant to Paragraph 6 of Schedule 29 of CA20, in all cases, proceedings cannot be commenced earlier than 3 months from the date the notice was served.

Although a uniform date seems a little unsuitable, particularly where the grounds for possession span non-payment of rent and anti-social behaviour cases, in practice, given the moratorium on possession hearings under the new PD 51Z, it will have no immediate impact on the recovery of possession.

Assured Tenancies, section 21 procedure:

Previously, pursuant to section 21 of the Housing Act 1988, an assured shorthold tenancy granted for a fixed term could be terminated on or after the expiry of the contractual term by giving not less than two months’ notice in writing in the prescribed form.  Now, pursuant to Paragraph 7 of Schedule 25 of CA20, landlords are required to give not less than three months’ notice in writing.

It should be noted that nothing in the Act invalidates notices validly served prior to the commencement of the relevant period.

Rent Act 1977 tenancies

The termination of a contractual tenancy under the Rent Act 1977 is brought about by the service of a notice to quit.  Once the contractual term is brought to an end, a landlord can obtain possession by bringing possession proceedings and making out grounds.

Section 5 of the Protection from Eviction Act 1977, prescribes that at least 4 weeks’ notice needed to be given to terminate the contractual tenancy.  Paragraph 2(1) of Schedule 29 of CA20 extends that period to 3 months, so that the earliest the contractual period can be brought to an end is 3 months from the date of the notice.

Further, until 30^th September 2020, paragraph 2(3) of CA20 introduces a new notice that the landlord must serve before commencing proceedings.  The landlord must serve a notice of intention to commence possession proceedings.  In that notice, the landlord must set out the grounds that will be relied on and a date after which proceedings will be commenced, which must not be a date earlier than 3 months from the date of the notice.

Secure Tenancies

Section 83 of the Housing Act 1985 prescribes the notice that the landlord must serve on secure tenants if it wants to terminate their tenancy on grounds.  Paragraph 3(c) of CA20 provides that when that notice inserts a date after which proceedings can be begun, it must give at least 3 months.  Similar provision is made in respect of notices for possession sent in anti-social behaviour cases under s.83ZA of the 1985 Act, again at least 3 months must be provided for.

Flexible tenancies, Introductory tenancies, Demoted tenancies

In all these types of tenancy, schedule 29 of CA20 increases the prescribed period in the notices for stipulating when proceedings will be commenced from 2 months to 3 months.

Tenancy statutory requirements

CA20 has not abrogated landlord’s duties in respect of safety in the accommodation, nor the sanctions that can be imposed if they are not complied with.  In particular, gas safety checks are not only mandatory, but if missed can impact on a landlord’s ability to recover possession.

Residential Property Sales

In an effort to prevent movement and unnecessary contact, the Government has provided guidance on the completion of residential property transactions.  In essence parties should agree to delay completion. Mortgage providers have agreed to assist.  This is all voluntary at present.

Read the guidance here.

Procedure

Summary:

• the courts are shifting towards non in-person hearings and are developing procedures to deal with matters on paper, on the telephone and through video links. Many have closed or are operating on a very limited basis in the interim.
• A list of priority courts, which will remain open is available here
• There will be no possession hearings until at least the end of June 2020: CPR PD 51Y

Civil Courts: High Court

The Rolls Building is listed as a priority court.

There is a High Court Contingency plan, which can be found here.

In summary, in urgent cases, follow the usual route for out of hours matters, by emailing the relevant listing or appointments email.

There is also a protocol for remote hearings, which can be found here.

The Business and Property Courts are holding hearings via Skype or telephone.

Civil Courts: County Court

Limited and ad hoc at present.  Central London has been closed to update facilities and hearings have been by telephone.

Tribunals: General

There is a general Pilot PD for all tribunals, first-tier and upper.

In summary:

• where a tribunal can make a decision on the papers, that will be the default position. Otherwise, cases are likely to be triaged, so that a preliminary decision can be made on the papers, if a party still wishes a hearing, then it can be carried out remotely.
• References in the rules to ‘a hearing’ are to be read as a ‘remote hearing’.
• Inspections are suspended, but can be carried out via photographs or drive by.
• The impact of Covid-19 is to be taken into account when considering applications for extensions of time or postponements.

Property Chamber

Guidance for Users has been published and can be found here.

In summary:

• There are no in person hearings until further notice.
• All communication should be by email, the relevant emails are contained in the guidance.
• For existing matters, they can be determined either on the papers or via remote hearings.
• New applications should be made by email.
• Arrangements are being made for remote hearings, but it is likely to take around 6 weeks to implement and to notify parties.

Upper Tribunal – Lands Chambers

Hearings are currently being conducted by Skype.

Presidential Guidance has been given on the conduct of proceedings, which can be found here.

 

By Piers Harrison, Daniel Dovar & Will Beetson.

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