COVID-19 – An Inadvertent Moratorium on Forfeiture?
We consider the impact of the Emergency Measures in Public Interest (COVID-19) Act 2020 on commercial tenancies and whether it has created an inadvertent freeze on forfeiture in the sector?

 

On the same day the Emergency Measures in Public Interest (COVID-19) Act 2020 (the Act) came into force - 27 March 2020 – many commercial tenants became liable for a further quarter of their annual rent and related outgoings.

As set out in our previous article, here, in the absence of a commercial lease specifically providing for a scenario like COVID-19 (which is highly unlikely) a tenant is not entitled to withhold rent or seek a rent reduction.  A unilateral decision by the tenant to cease or even partially pay the rent under the lease would constitute a breach of covenant and open the door to a landlord to several remedies, the most radical of which would be the forfeiture of the lease.

Impact on Commercial Tenancies

While the Act specifically prohibits residential rent increases and prevents landlords from terminating residential tenancies during the COVID-19 crisis (being a period of three months from 27 March 2020), its impact on commercial tenancies is less clear cut.  In this respect, the Act is radically different from its UK equivalent, the Coronavirus Act 2020 (UK) which explicitly prohibits the forfeiture of commercial premises until 30 June 2020 for the non-payment of rent.

Under the Irish Act all proposed "evictions" are prohibited during the operation of the Act. Although the language used in the Act is broad it may be somewhat tempered by the specific reference to the Residential Tenancies Act 2004 in the interpretation section of the Act.

Of equal interest to all residential and commercial landlords and tenants is the prospective duration of the prohibition on evictions.  While other measures under the Act are stated to last for the duration of the 'emergency period' (defined as a period of 3 months commencing on the enactment of the Act, which period can from time to time be extended following consultation), the prohibition set out under this section on evictions continues 'during the operation' of the Act.  Even on a conservative interpretation, this would appear to bestow a considerably longer lifespan than three months on the prohibition on those evictions captured by the Act and unlikely to have been intended.

Court Guidance?

In the current climate, it is likely that the courts will be compelled to provide some guidance on the application of the legislation to commercial tenancies and its duration.

In Design Features Limited v Goldstein Property ICAV & Ors, which was heard before Mr Justice Humphries on 23 April 2020, a tenant successfully applied for an interim injunction against its landlord for an alleged eviction from a Dublin warehouse. It did so on the basis that the landlord was, amongst other things, in breach of the prohibition on evictions under the Act.  The landlord in this case allegedly locked the tenant out while its goods remained in the warehouse.  The application was made on an ex parte basis (only one side represented) and so the Court has not yet heard any counter arguments from the landlord.  Newspaper articles suggest the landlord refutes the suggestion the tenant was denied access to its goods.  The matter is listed next before the High Court on 7 May 2020 when the Court will hear from both parties. 

Every case is determined by its facts and until the landlord has presented its counter arguments and the Court opines on the substantive argument as to the application of the Act to commercial tenancies, tenants should be wary in taking any comfort from it.  

Watch this space. 

 

Our partners, associates and our support teams are available as usual to support your business. We also have a specific COVID-19 Hub to help you.  

 

 

Key Contacts

Richard Breen Partner

Gerard James Senior Associate