COVID-19: Landlords’ enforcement options to be reduced further
**Updated 27 April** Mark Banham, head of the property litigation team, provides an update on new Government measures aiming to protect commercial tenants on the high street from landlords seeking to recover rent arrears by serving a statutory demand, filing a winding up petition or by using the Commercial Rent Arrears Recovery (CRAR) procedure.
In my previous article on 20 April 2020 (see below) I explained the new measures that the Government had put in place to protect commercial tenants by way of the Coronavirus Act 2020. These current measures are in place to protect commercial tenants from forfeiture and possession proceedings up to 30 June 2020. Within my previous article I highlighted that it remained to be seen whether this moratorium on forfeiture and possession action would be extended or whether further measures would be introduced to provide greater protection to tenants.
Yesterday (23 April 2020), the Government announced plans to provide further protection to commercial tenants, in particular those tenants in the hospitality and retail sectors. During the course of this week businesses with national presence on the high streets petitioned the government to do more to protect commercial tenants from enforcement action (including insolvency action) being taken by landlords.
The Government has recognised that in the majority of cases landlords and tenants are working proactively together to strike a balance between their competing commercial interests but there are to be further measures to prevent landlords from recovering rent from defaulting tenants by using insolvency procedures and CRAR. The full details of the planned legislation which will be part of the Corporate Insolvency and Governance Bill have yet to be provided but the Government will be introducing the following temporary measures:
- The introduction of a temporary ban on the service of statutory demands and filing of winding up petition where a company is unable to pay due to the continuing coronavirus pandemic.
- The prevention of the use of CRAR unless the landlord is owed 90 days, or more, of unpaid rent.
It appears that these measures will be in place until 30 June 2020, however this period can be extended in line with the forfeiture and possession moratorium. Whilst these measures are designed primarily to protect tenants, the Government has urged tenants to continue paying the rent that they are able to afford. In acknowledgement of the strain faced by commercial landlords, the Government has also expanded the Coronavirus Business Interruption Loans Scheme to provide support.
At the time of writing this article, there remain many unanswered questions as to how these measures will work in practice. For example:
- Will these temporary measures apply to all commercial tenants or just those who operate in the retail and hospitality sector?
- Will landlords be able to serve a statutory demand to be actioned when the stay is lifted or will they automatically be void?
- Will there be any protection for those that have provided Personal Guarantees?
The government has announced (25 April 2020) that the measures will “temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus”.