Important update for commercial property landlords

Government announces temporary ban on Statutory Demands and the use of Commercial Rent Arrears Recovery (CRAR).

In our article on 24 March 2020 we reported that under The Coronavirus Act 2020, Landlords were banned from forfeiting commercial premises either by the issuing of court proceedings or by using peaceful re-entry and changing the locks for rent arrears. The premise of the new regulations was to prevent any businesses from being closed down whilst being either unable to trade or because of an inability to pay rent due to significant reduction in income because of the measures brought in to try to slow the spread of Coronavirus.

Our experience thus far is that many landlords and tenants are having meaningful discussions with each other and being flexible. We have seen many methods being agreed whether that be temporary rent holidays or rent reductions to just allowing a temporary changing the method of paying rent. One such example which has emerged has been landlords allowing tenants to pay rent monthly in arrears. This has been particular successful for those where the quarter rent was due on 24 March. Of course there are occasions where for one reason or another it has not been possible for parties to reach agreement, or the landlord has unwilling or unable to work with their tenants to reach a practical solution and have aggressively pursued rent arrears either using the CRAR provisions or by serving a Statutory Demands to attempt to recover rent.

Because of the increase in the numbers of Statutory Demands being issued the Business Secretary, Alok Sharma brought in new measures on 23 April 2020 which will be included in the Corporate Insolvency and Governance Bill set out earlier this month to temporarily ban the use of Statutory Demands and subsequent Winding Up Orders where a company cannot pay their rent due to the Coronavirus. The new legislation will be in force until 30 June, and may be extended in line with the moratorium on commercial lease forfeiture. Details of this can be found on our previous article here.

These measures include;

• The introduction of the new temporary measures to safeguard commercial tenants against aggressive debt recovery actions during the coronavirus pandemic
• statutory demands and winding up petitions issued to commercial tenants will be temporarily voided and changes to be made to the use of Commercial Rent Arrears Recovery
• landlords and investors are (again) being urged to work collaboratively with tenants unable to pay their bills during coronavirus pandemic.

Under these measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why this is the case. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of the coronavirus. As yet it is not known the exact detail of the factors the courts will be consider but we would expect a further announcement on this in due course either by the Government or the Judiciary.

The recovery of rent arrears using the CRAR provisions will not be able to be used unless 90 days or more of unpaid rent is owed. This temporary change in the law will be brought in using a separate Statutory Instrument which is being rushed through Parliament and should be in force any day.

As always, we would urge landlords and tenants to keep the lines of communication open both now and throughout the unprecedented crisis, we now all face.

If you would like to speak to someone within our Commercial Property or Dispute Resolution teams please contact our offices on 01228 552222 or e-mail hello@burnetts.co.uk . Please note that both telephone and video appointments can be arranged during this period of self-isolation.