THE IMPACT OF CORONAVIRUS (COVID-19) ON HOUSING AND REAL ESTATE LITIGATION


Oliver Caplan considers the impact that the current situation is having on housing and real estate litigation.

Over the last month we, as a society, have been required to embrace a new way of approaching our professional and social lives. Litigators have had to adapt and evolve at a light speed to ensure the wheels of justice continue to effectively turn.

As to matters of law and procedure, there is very little that remains unaffected by the novel coronavirus. Housing and Real Estate litigation has experienced seismic changes following the introduction of the Coronavirus Act 2020 (“CA20”)  and Practice Direction 51Z: Stay of Possession Proceedings, Coronavirus (“PD 51Z”). Many factors motivate the developments in the law but, particularly and so far as residential possessions are concerned, the question must be asked: how easily a person can “STAY AT HOME, STAY SAFE, SAVE LIVES” if required to vacate his / her home.

I address the fundamental changes in the law and procedure below.

Residential Properties

  • Prospective possession claims

Section 81 of CA20 gives effect to Schedule 29. This primary legislation updates the notice period that must be given to terminate a tenancy. Until at least 30 September 2020 a landlord must now give a standard 3 months’ notice.  This change impacts termination rights governed by the Rent Act 1977, the Housing Act 1985, the Housing Act 1988 and the Housing Act 1996, the respective statute being updated accordingly (see paragraphs 2 to 9 to Schedule 29). There have also been appropriate modifications to the prescribed forms of notice (see paragraph 10 to Schedule 29).

CA20 does not invalid notices that have been validly served prior to commencement of the relevant provisions, however, for the reasons set out below a landlord would be restricted from pursuing possession for an initial period of 90 days from 27 March 2020 (i.e. until 25 June 2020)

Schedule 29 is set to expire on 30 September 2020, however, in accordance with paragraph 1(1)(b) that expiry date may be extended by the relevant national authority so far as circumstances may require. Similarly, in accordance with paragraph 13, the three months’ notice period may be extended to as much as six months.

Even if a landlord is minded to serve a notice terminating a tenancy the Ministry of Housing, Communities and Local Government have issued the following advice upon its guidance note – Coronavirus (COVID-19) Guidance for Landlords and Tenants:

We strongly advise landlords not to commence new notices seeking possession during this challenging time without a very good reason to do so. It is essential that we work together in these unprecedented circumstances to keep each other safe. 

It is anticipated that Judges will adopt a sympathetic approach to tenants who struggle to pay their rent on account of financial difficulties faced as a consequence of economic fallout. Indeed, landlords and tenants are encouraged to enter into dialogue and agree payments plans wherever possible.

Possession claims

  • On 27 March 2020 PD 51Z was enacted in the following terms:

This Practice Direction supplements Part 51

1. This practice direction is made under rule 51.2 of the Civil Procedure Rules (“CPR”). It is intended to assess modifications to the rules and Practice Directions that may be necessary during the Coronavirus pandemic and the need to ensure that the administration of justice, including the enforcement of orders, is carried out so as not to endanger public health. As such it makes provision to stay proceedings for, and to enforce, possession. It ceases to have effect on 30 October 2020.

2. All proceedings for possession brought under CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed for a period of 90 days from the date this Direction comes into force.

3. For the avoidance of doubt, claims for injunctive relief are not subject to the stay in paragraph 2.

PD 51Z stays all possession claims issued under CPR Part 55 until, at least, 25 June 2020. Not only does it cover issued possession claims but any claim that may be issued between now and 25 June 2020. It covers all manner of rental agreements. All tenants and licensees who benefit from protection from eviction under the Protection from Eviction Act 1977 are protected from possession proceedings. It covers possession claims that may be pursued by mortgagees against homeowners. It covers Part 55 possession claims against persons who do not have rights to occupy land (i.e. squatters). Owners of land may still bring injunction claims to remove those who unlawfully come onto land in the usual way, however, there may be problems encountered when seeking to enforce those order given the enforcement restrictions.

PD 51Z effectively halts all aspects of possession proceedings. This would ostensibly include any non-possession aspect including any money claim or Counterclaim¹. Indeed, the writer is advised of a recent case before HHJ Hodge QC, sitting as a Judge of the High Court in Manchester, adjourning proceedings concerning a possession claim, a money counterclaim and extant appeals in its entirety².

It is important to note that, so far as a tenancy continues, the respective parties’ duties to each other remain. A tenant must continue to pay his / her rent. The landlord’s repairing obligations do not change, particularly in respect of urgent health and safety issues. The parties are expected to engage with each other with a view arranging repairs to be undertaken whilst following the Governments’ public health guidance.

Otherwise than arising upon Part 55 possession claims, money claims arising out of tenancies remain unaffected. It is interesting to see whether landlords are minded bring discrete money claims for payment of rent and / or whether tenants bring damages claims for landlord’s breach of repairing duties that otherwise might arise as Counterclaims.

Commercial Properties

  • Right to re-enter / forfeiture upon rental arrears

Section 82 CA20 concerns the right of re-entry / forfeiture upon a business tenancy that may be following the non-payment of rent. Effectively, a landlord may not enforce a right of re-entry / forfeiture “by action or otherwise” during the “relevant period” (i.e. before 30 June 2020, at least) (see Section 1 of CA20). This does not impact the tenant’s liability to pay rent. Equally, this does not prevent the right to re-enter arising, only prevents enforcement of the same. One can readily expect a spike of forfeitures / instances of commercial landlords exercising re-entry upon expiry of the relevant period in the absence of further transition provisions.

Much in the same way as concern residential possession claims pursued under CPR Part 55 any claim for forfeiture made under that part stayed for 90 days in accordance with PD 51Z.

Conclusion

These are challenging times for us all, not least those who are at risk of losing a home or business premises as a consequence the current and future economic climate. We can expect further developments in the area of housing and real estate litigation commensurate with how society is impacted by the coronavirus. As litigators we must ensure we are able to give appropriate advice and reassurance to all those who require help and assistance.

Please feel free to contact us on our usual contact details and we will be delighted to assist you.


¹See Judgment of Coulson LJ in Grant v Dawn Meats (UK) [2018] EWCA Civ 2212 at paragraph 18      ²Promontoria Chestnut Limited v Hancock (unreported April 2020)