Tim Morshead QC and Evie Barden have jointly written the below article addressing the key points on whether a corporate tenant can get an injunction to restrain presentation of a winding up petition whilst the Coronavirus Act 2020 restricts its landlord’s ability to forfeit its lease.
1. On 26th March 2020, the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 SI No 350 came into force. Those regulations repealed and revoked earlier regulations, which came into force on 21st March. The broad effect of those regulations was to enforce measures announced by the Prime Minister on 23rd March: businesses selling food and beverage on premises had to cease to do so, as did most shops and a number of business were prevented from operating altogether. Additionally, people were not permitted to leave where they live without reasonable excuse. Similar restrictions came in force on the same day in Wales by the Health Protection (Coronavirus, Restrictions) (Wales) Regulations 2020 SI No 353. The restrictions under both sets of regulations are in force until 26th September 2020 unless the Secretary of State declares the restrictions or requirements no longer necessary.
2. Additionally, on 25th March 2020, Parliament enacted the Coronavirus Act 2020. Section 82(1) of the Act provides that a landlord is prevented from exercising a right of re-entry or forfeiture, under a “relevant business tenancy”, for non-payment of rent, by action or otherwise, between 25th March 2020 and 30th June 2020. A relevant business tenancy is one to which Part 2 of the Landlord and Tenant Act 1954 applies or to which it would apply if the occupier were the tenant.
3. Against that backdrop, many companies with 1954 Act protected tenancies, having shut their premises and feeling the pain of COVID-19, have chosen not to pay rent that fell due on the March quarter day. Without the ability to forfeit, some landlords are now serving statutory demands on their tenants or threatening to present winding up petitions.
4. The consequences of a winding up petition are serious: advertisement of a petition in the Gazette will often mean the company’s bank account is frozen and that creditors are unwilling to trade with the company. In the present climate, it may well impede the company’s access to essential credit.”
More details can be read here.