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Coronavirus - Additional legal protections for residential and commercial tenants in England and Wales - UK

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In addition to the FCA’s recent guidance (see our note summarising the main points here) on payment holidays and repossession actions addressed to mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators in the context of consumers suffering payment difficulties as a result of the government measures imposed to tackle the coronavirus pandemic, the government’s Coronavirus Act 2020 (the Act) has now received Royal Assent this week. 

The Act includes a wide range of emergency powers, ranging from the registration of healthcare workers, registration of deaths, information about the food supply chain, statutory sick pay, postponement of elections, to the use of video and audio technology in court proceedings – essentially everything required to give effect to recent government announcements to keep key functions of the United Kingdom State operational and that were not already permitted or empowered under existing legislation.

In addition to these general provisions there are two sections seeking to protect both residential and business tenancies in England and Wales.  There are also protections for business tenancies in Northern Ireland.  These sections do not, however, extend to Scotland, which is expected to bring forward its own Coronavirus legislation to the Scottish Parliament soon, and which may provide similar protections for tenants in Scotland.

These provisions will be of interest to both residential and commercial mortgage lenders, including lenders in the Buy-to-Let market, where their borrowers may experience difficulties in making loan repayments caused by delays in rental payments from tenants.  The Act’s provisions mean that, for a short period, landlords will be unable to terminate tenancies as quickly as was previously the case (and then re-let the property) as a result of the temporary protections for tenants which are intended to provide tenants with some security of tenure if they experience cashflow difficulties caused by the government’s recent emergency measures and the wider impact of those on the economy.

What does the Act say about residential tenants?

Section 81 and Schedule 29 of the Act provide for an extension to the current statutory notice periods (giving notice to a tenant to terminate a tenancy, to quit, or otherwise seek repossession) as specified in various pieces of housing and tenancy legislation to a new standard three months’ notice period, in substitution for such shorter periods as specified in those enactments.  In particular, the schedule refers to residential tenancies protected by, or subject to, the following statutes: 

  • Protected tenancies Section 5 of the Protection from Eviction Act 1977
  • Statutory tenancies under Section 3 of the Rent Act 1977
  • Secure tenancies under Section 83 of the Housing Act 1985
  • Flexible tenancies under Section 107D of the Housing Act 1985
  • Assured tenancies  under Section 8 of the Housing Act 1988
  • Assured shorthold tenancies under Section 21 of the Housing Act 1988
  • Introductory tenancies under Section 128 of the Housing Act 1996
  • Demoted tenancies under Section 143E of the Housing Act 1996

One might safely conclude from looking at this list of legislation that the law on residential tenancies intended to protect tenants and provide landlords with effective rights in England and Wales was overdue consolidation and simplification, but perhaps that is a task for government in calmer times.  These various provisions (and the changes made to them by the Act) will, however, protect most tenants of Buy-to-Let landlords.

The Schedule also modifies the respective time periods that are specified in statutory notices and forms prescribed in Regulations made under the Housing Acts 1985 and 1988 to the same three month notice period:

  • Parts 1 and 2 of the Schedule to the Secure Tenancies (Notices) Regulations 1987 (S.I. 1987/755) under the 1985 Act
  • The Schedule to the Assured Tenancies and Agricultural Occupancies (Forms) (England) Regulations 2015 (S.I. 2015/620) (which applies in relation to England) under the 1988 Act.
  • The Schedule to the Assured Tenancies and Agricultural Occupancies (Forms) Regulations 1997 (S.I. 1997/194) (which applies in relation to Wales) under the 1988 Act.

The extension period for the three months’ notice period imposed by the Act on the existing tenancy legislation applies from 25 March 2020 to 30 September 2020 (the “relevant period”) – i.e. the three months’ notice extension period applies to all repossession actions or notices to terminate those tenancies specified where notice is given by landlords up to and including the 30 September 2020; thereafter the law (as it currently stands – but see the extension powers below) returns to the original, pre-existing statutory notice periods in the separate pieces of housing legislation outlined above with effect from 1 October 2020.  Paragraph 13 of the Schedule does however include the power to change the new standard three month notice periods specified in the schedule to a new standard six month (or shorter) notice period, should the pandemic continue to affect the United Kingdom for an extended period (e.g. in June 2020 the government could decide to extend the new standard notice period in all the above tenancy legislation to five months, rather than the current three months initially imposed). 

Further, regulations may extend the relevant period during which the Act’s powers to impose these longer notice periods can be utilised – no long-stop date is specified for this power, which would potentially enable new standard tenancy notice periods (of up to six months) beyond the initial period currently specified in the Act as ending on 30 September 2020.

What does the Act say about commercial tenants?

Section 82 of the Act 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 Act also makes provision in relation to existing forfeiture proceedings before the courts (i.e. proceedings commenced before the Act entered into law) for rent arrears; the court may not during the relevant period order that possession be given before the end of the relevant period.

In any existing proceedings in the High Court seeking to forfeit a “relevant business tenancy” for rent arrears, the High Court may not during the “relevant period” order that possession be given before the end of the “relevant period”.

A “relevant business tenancy” means:

  • a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies, or
  • a tenancy to which that Part of that Act would apply if any relevant occupier were the tenant.

Part 2 of the 1954 Act defines such a tenancy as one where the property is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.  This includes occupation by a company in which the tenant has controlling interest.  This definition would, however, seem to exclude Buy-to-Let residential tenancies by commercial landlords, as BTL properties are not typically occupied by a tenant for the purposes of a business carried on by him; BTL tenants should be protected under the previous residential tenancy provisions outlined above.

The “relevant period” in the case of commercial tenancies is shorter than for residential tenancies, and commences on 25 March 2020 when the Act received Royal Assent and currently ends on 30 June 2020.  However, as with residential tenancies powers, this period may be extended by the Secretary of State passing Regulations by Statutory Instrument, and there is no long-stop date for this power of the government to extend the relevant period.

The Act also provides that for the purposes of determining whether the ground mentioned in section 30(1)(b) of the Landlord and Tenant Act 1954 (persistent delay in paying rent which has become due) is established in relation to a business tenancy protected by the Act, any failure to pay rent under that tenancy during the relevant period (whether rent due before or in that period) is to be disregarded.  Tenants will therefore not be penalised for a failure to pay rent during the pandemic crisis measures.

A government press release of the Act’s powers in relation to commercial tenancies is available here.

When do these provisions apply?

These provisions and most (but not all) of the other sections of the Act came into force the day it received Royal Assent: 25 March 2020

A sunset clause provides that most sections of the Act expire after two years.

Further information

We also have a hub containing more general information about legal issues arising as a consequence of the government measures to address the Coronavirus pandemic, which you may find useful.