The ongoing Coronavirus pandemic is having far reaching effects on both commercial landlords and tenants.
Property litigation solicitor Liz Shaw looks at the legislative changes.
Liz said: “As landlords are now aware, due to the Coronavirus Act 2020, there is a fetter on the landlord’s right to evict a tenant for failure to pay rent which is in force, at the earliest, to 30 June this year. That period could be extended.
“The Government announced last week that it is also going to bring in further measures to ban landlords from “aggressive methods” to collect unpaid rent and other sums due from High Street and other commercial tenants.
“These measures will mean that Statutory Demands and Winding Up Petitions issued to commercial tenants are temporarily voided where they are unable to pay debts due to Coronavirus.
“Furthermore, a landlord will not be able to rely under the Commercial Rent Arrears Recovery (CRAR) a method of seizing tenant property to sell to meet rental debts until at least 90 days or more of unpaid rent is owed.
“These restrictions will also be in place initially until at the earliest 30 June 2020. There is an option for the Government to extend as in the case of the moratorium on forfeiture.”
These changes will be implemented through the Corporate Insolvency and Governance Bill 2020. The Bill has not yet been made law.
Liz added: “Whilst the detail will be in the legislation, it suggests that Winding Up Petitions based on an argument that the tenant is unable to pay its debts will not automatically be prohibited, but will face the scrutiny of the Court to determine if the reason for the tenant’s inability to pay is as a result of Covid-19.
“In practice one would assume the vast majority of businesses will be able to show that Covid-19 has impacted on its cash flow and ability to pay its rent.”
More importantly, the Government measures still do not provide a rent holiday to commercial tenants.
Liz added: “At present, there is no fetter on the landlord’s right to recover the rental arrears by other methods for example draw down on tenancy deposits or commencing Court proceedings to recover amounts unpaid.
“The Government’s plan is that landlords and investors work collaboratively with High Street businesses calling on tenants “to pay rent where they can afford it to also recognise the strains felt by commercial landlord’s too”.
“It remains to be seen whether this latest intervention will create a move to greater cooperation between landlords and tenants or whether the temporary restrictions will simply store up potential disputes and debt for the future.”
Further advice for commercial landlords is available from Liz Shaw at Wake Smith Solicitors email [email protected] or call 0114 224 2041.
