COVID-19: No Moratorium on Forfeiture of Commercial Tenancies
We consider the impact of the Residential Tenancies and Valuation Act 2020 on commercial tenancies and the clarity it brings to the forfeiture or termination of commercial leases.

 

The Residential Tenancies and Valuation Act 2020 (Residential Tenancies Act) entered into force on 1 August 2020. While it is mainly focused on residential tenancies, the Residential Tenancies Act also has particular application to commercial tenancies.  This is because it has eliminated the uncertainty surrounding the forfeiture or termination of commercial tenancies introduced by the Emergency Measures in Public Interest (COVID-19) Act 2020 (Emergency Measures Act). earlier this year. 

As discussed in our previous article, here, the Emergency Measures Act introduced a prohibition on all proposed evictions during the operation of the legislation.  Even though the Oireachtas debates on the Emergency Measures Act referred only to residential and not commercial tenancies, and there was specific reference to the Residential Tenancies Act 2004 in the interpretation section of that legislation, many commentators interpreted the prohibition on evictions to apply to commercial tenancies and not just residential tenancies.   
 
Our view of the Emergency Measures Act was that a commercial tenant needed to be wary in taking comfort from the prohibition on evictions and that  the courts would likely be compelled to provide some guidance on the application of the legislation to commercial tenancies and its duration. 
 
Court guidance is no longer necessary because of the clarity introduced by the Residential Tenancies Act.  Rather than amending the provisions of the Emergency Measures Act dealing with the general prohibitions on evictions, the Residential Tenancies Act simply deletes them.  As a result, it is now clear that the forfeiture or termination of commercial leases during the operation of the Emergency Measures Act is no longer prohibited, to the extent that it ever was. 
 
The clarity brought by the Residential Tenancies Act is to be welcomed as it provides certainty to both landlords and tenants in commercial tenancies in a forfeiture or termination situation.
 
As discussed in our recent vlog (see below or click here for the full article) forfeiture is only one of a number of remedies open to a landlord and is often an unattractive option where it discharges a tenant from its ongoing obligations under the lease.  Because of this, and due to the unprecedented uncertainty in the commercial property sector generally, it is unclear if the clarity introduced by this legislation will lead to a surge in commercial tenancy terminations.
 
Please contact Richard Breen, Brian O'Callaghan or your usual William Fry contact for help or advice about the termination or forfeiture of commercial leases.  For guidance on a range of issues affecting you business, see our COVID-19 Hub.   

 

 

 

Key Contacts

Richard Breen Partner

Gerard James Senior Associate