Whilst the Coronavirus Act 2020 curtailed a commercial landlord’s ability to regain possession of the property on the basis of unpaid rent during the crisis, landlords have been able to continue to pursue commercial tenants for unpaid rent.
However, the Government has recently announced new temporary measures to safeguard commercial tenants against what it refers to as ‘aggressive debt recovery actions during the coronavirus pandemic’ and to force ‘landlords and investors … to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic’.
Under the proposals “statutory demands and winding up petitions issued to commercial tenants to be temporarily voided and changes to be made to the use of Commercial Rent Arrears Recovery, building on measures already introduced in the Coronavirus Act”.
The Government has proposed to “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 [commercial tenant] cannot pay its bills due to coronavirus … 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. 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 COVID-19.”
The law is planned to come into being through the Corporate Insolvency and Governance Bill. However, that Bill is not before Parliament and its contents are unknown. It is unclear when, and if, the proposal will become law.
However, on the face of the detail provided at this stage, the temporarily ban the use of statutory demands and winding up petitions will only effect corporate insolvency (company commercial tenants) and therefore it may remain open to landlords to pursue the bankruptcy of commercial tenants where they are individuals, sole traders or partners in a firm.
Commercial rent arrears recovery (CRAR) is a method of enforcement for recovering rent arrears relating to commercial property by having Bailiffs attend property to seize goods for sale.
On 25 April 2020, the Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 (the ‘Regulations’) came into force. The Regulations set out that between 25 April 2020 and 30 June 2020 there must be at least 90 days’ rent outstanding before CRAR may take place (an increase from the the equivalent of 7 days’ rent). However, nothing in the Regulations affects any enforcement action taken prior to 25 April 2020.
Depending on whether the restrictions on insolvency are brought into effect, and whether they apply to both limited Companies and individuals as commercial tenants, should a tenant fail to make payment of its rent during this period then the options open to a commercial landlord to deal with matters, include to:-
