Alerts

Covid-19: The Coronavirus Act 2020 – Property and Construction

Property

During these unprecedented times, the Government has stepped in to provide some much -needed reassurance to both residential and business tenants. The Coronavirus Act 2020 (the “Act”) has now received Royal Assent; its introduction will see temporary restrictions placed on residential and commercial landlords to try and ease the strain placed on tenants as a result of Covid-19.

Residential Tenancies

We have seen increasing reports of individuals facing unemployment due to the Covid-19 crisis, leaving many unable to pay their rent and fearing eviction as a result.

In a bid to quell such worries, the Act provides for an extension of the time required to be given between the service of a notice and the commencement of possession proceedings for many social and private tenancies.

For those tenants on assured shorthold tenancies existing under the Housing Act 1988 (“HA 1988”), should a ‘section 8 notice’ be served for recovery of possession following rent arrears, the landlord will now have to wait three months from the date the notice was served before commencing proceedings. This is a significant increase in comparison to the two-week period that is normally required. This extended period is also applicable to ‘section 21 notices’ for recovery of possession upon the expiration or termination of an assured shorthold tenancy, thereby increasing from two months to three months.

No restrictions appear to be placed on the recovery of possession against trespassers.

The extended notice requirements will be applicable from the day after the Act is passed, which we anticipate being 30 March 2020 up until 30 September 2020, however this is subject to extension. At the present time, there is nothing to suggest that any notice served before the Act was passed will be invalid.

Once the extended notice period expires, landlords and tenants are asked to work together to find a harmonious solution that works for all in relation to built up rent arrears. At present, there is no restriction on landlord evicting tenants if such arrears cannot be paid once the three-month notice expires.

The ‘Tenancy Deposit Scheme’ has useful guidance on its website, to both landlords and tenants regarding the handling of deposits during this period.

Business Tenancies

Similar support is available for those business tenants whose businesses are impacted by Covid-19.

The Act provides measures to ensure that no business will be forced out of its premises should they fail to meet rent payments over the next three months due to the Covid-19 crisis. This includes a restriction on the right of re-entry and forfeiture for the non-payment of rent for those tenancies falling within Part II Landlord and Tenant Act 1954 (“LTA 1954”). The restrictions will come into force the day after the Act is passed and will remain in place until 30 June 2020, subject to extension should it be considered necessary. In the case of forfeiture, the restrictions can be applied retrospectively. In cases where an order for possession is given, deferred possession is to be ordered.

As at the time of writing, it is uncertain whether the Act applies to business tenancies contracted out of the LTA 1954. If you are unsure whether or not your business tenancy falls within the Act, please contact us for assistance.

Construction

The Government has yet to call for the closure of construction sites around England and Wales, despite concerns from the National Federation of Builders about the practical application on a construction site of the current guidance of keeping a 2-metre distance and washing hands for twenty seconds regularly.

The Prime Minister confirmed this week that the response to Covid-19 is based on the fact that many people will still need to go to work. Health Secretary Matt Hancock supported this stance, adding that any worker who cannot work from home should go to work to ‘keep the country running’. This position, however, and the failure to close construction sites has led to criticism, such as that of Manchester Mayor, Andy Burnham, who believes the decision to keep construction workers on site is purely economic without consideration for the health of those workers.

Some of the larger construction firms are taking their own decisions separate to Government advice. The past week has seen Lendlease, Mace, Persimmon, Taylor Wimpey and Barrett announce that they will be closing sites in order to prioritise the health of their employees and customers. Some firms, such as Redrow and Cairn Construction, have however opted to remain open at this time, believing that social distancing can be implemented on their sites.

Some of the issues identified by industry in the Government’s stance have been:

  • Construction contracts require the contractor or subcontractor (“SC”) to complete the works, unless there is a listed event contained within the contract that would allow the SC to claim relief of its obligations. Under many construction contracts, the SC would be in breach of contract if he failed to meet those obligations. The likely result being a claim for damages.
  • If the business instructs contractors to stop work, then the SC would likely be relieved from its contractual obligations.
  • Business owners will not make the call for fear of being exposed to claims, nor will SCs for fear of claims from clients for breach of contract.
  • If the Government was decisive in its decision (closing construction sites), it would resolve this deadlock.
  • Government departments should be temporarily banned from claiming damages against a SC if it cannot fulfil its obligations under the contract as a result of Covid-19.
  • Businesses are getting resistance from site staff who feel at risk by being asked to work on non-essential jobs.
  • Despite private sector sites shutting, public sector ones remain open.

A defence of Covid-19 being a frustrating (in law) event seems unlikely if recent case law is to be followed.

For those sites continuing it remains to be seen for how long, when suppliers, other specialist contractors etc. are no longer working.

It seems a little recessive of the Government to have no clear instruction to one of our key industries. The mixed messages from Government earlier in the week, meant that construction sites continued to work with the Police attending to tell them to shut down.

Whether this is/was the right call is a question for another day, in the post-Covid-19 post-mortem. For now, the message appears to be: clear guidance is still needed.

What it means for you

The Act should provide some much-needed reassurance to business and residential tenants alike, at least in the short term. There are, however, concerns that the Act fails to provide any long-term protections for tenants and may simply prove to be a delay of the inevitable.

For landlords, it paints a bleak picture: as many brace themselves for a depletion in rent payments over the next few months, they also face a restriction on the channels used for recovery of their property, albeit for a three month period.

Some security is offered to residential landlords following the extension of the three-month mortgage holidays which now includes Buy to Let mortgages.

As for commercial landlords, it is worth noting that the Act only restricts one remedy available for non-payment of rent, leaving the door open for them to pursue rent arrears through other means such as debt recovery or use of Commercial Rent Arrears Recovery (known as ‘CRAR’).

Should you be a landlord or a tenant facing uncertainty as a result of Covid-19 and require assistance on any of the issues identified above, please contact our Property team on 01228 552600 or 01524 548494.

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