Government moves to provide commercial tenants with further protection

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Our article “Commercial Business Lease Rent Payment, Enforcement and COVID-19”, published earlier this month, considers the protection afforded to commercial tenants by the temporary moratorium on evictions introduced by section 82 of the Coronavirus Act 2020.  It also highlighted some of the potential options landlords were still able to pursue with a view to recovering unpaid rent from their tenants notwithstanding the moratorium on evictions.

Whilst many landlords and tenants have been working together to agree solutions to enable them both to make it through these unprecedented times (for example, by agreeing terms to temporarily suspend or defer rent payments and recording the agreement in a side letter to the lease), some landlords have been exploiting the other options and adopting aggressive debt collection tactics to pursue tenants for non-payment of rents (for example, by serving tenants with statutory demands and exercising the Commercial Rent Arrears Recovery (CRAR) procedure).

In order to stop what the Government considers to be “unfair practices” by landlords, the Government announced on 23 April 2020 that further measures will now be introduced with a view to plugging some of the gaps in the legislation being exploited to further protect commercial tenants.  The new measures are to be detailed in the Corporate Insolvency and Governance Bill and secondary legislation.  The measures are said to include the following:

  • A temporary ban on:
    • the use of statutory demands made between 1 March 2020 – 30 June 2020;
    • winding up petitions presented from 27 April 2020 – 30 June 2020;

in each case where the tenant cannot pay its bills due to coronavirus;

  • Landlords being prevented from using CRAR unless they are owed 90 days of unpaid rent (an increase from 7 days of unpaid rent).

As the draft measures themselves have yet to be published, the detail as to how this will work in practice is currently not known (for example, the Government’s announcement is focused on landlords and tenants and it is unclear whether the restriction on the use of statutory demands and winding up petitions will  apply to other non-landlord creditors).

Whilst these measures should further safeguard commercial tenants during the coronavirus pandemic, Government have urged tenants to continue to pay rent where they can afford to do so and recognise the strain is also being felt by landlords and has highlighted some of the support available to them (for example, the Coronavirus Business Interruption Loan Scheme (CBILS)).

If you are a commercial landlord or tenant who require further advice and support on your rights and obligations in this constantly evolving landscape, please get in contact with us to discuss further – Simply call the team on 01903 229999 or fill out the form below.

Disclaimer – Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.