As the Country entered lockdown in March 2020, the Government introduced various measures in response to the COVID-19 pandemic. Many focused on giving commercial tenants temporary protections to assist during the pandemic. Including giving rent arrear protection to commercial tenants. 

Both landlords and tenants of commercial property spent the last few months anticipating what the government will do next in relation to the recovery options for rent arrears. To assist with the outcome, in May 2021, interested parties were invited by the government to put forward their views on how the recovery options should be reinstated.

The 16th June 2021 saw the government provide an insight on what the future holds and the government’s announcement has provided tenants with further reassurance. It confirmed that there will be continued breathing space for businesses that had to remain closed during the pandemic and as a result are unable to pay their rent.

The announcement does make it clear that tenants should continue to pay their rent where they are able to do so. 

 

The main headlines are:

 

The ban on forfeiture

The ban on forfeiture for failure to pay rent will be extended to 25 March 2022. The definition of “rent” does not just mean annual rent, but also includes any amounts payable under the lease, including service charge and insurance. It must be noted that a landlord’s right to forfeit for non-payment of rent is specifically preserved and cannot be waived unless such a waiver is given expressly in writing. This means that landlords will be in a position to take immediate forfeiture action when the restrictions are lifted with respect to unpaid rent should they wish to do so.

 

Commercial Rent Arrears Recovery

The restrictions on using the Commercial Rent Arrears Recovery procedure (“CRAR”) are also to be extended from the current position, which stipulates that the landlord can only use CRAR if the tenant is in arrears of more than 457 days, rising to 554 days from the next quarter day on 24 June 2021.

 

Statutory Demands

The moratorium on serving statutory demands and issuing winding-up petitions are both to be extended to 30 September 2021.

 

Enforcement of tenant’s liability

  • Landlords are still able to take steps to enforce tenants’ liability under the lease, by means of contractual enforcement or debt recovery action via the issue of court proceedings.

Landlord and Tenant Act 1954

  • Landlords are still not able to rely on the tenant’s failure to pay rent during the pandemic as a reason to oppose the renewal of the lease under the Landlord and Tenant Act 1954.

 

Short term lease implications

  • The legislation does not apply to very short-term leases that were granted for a term of fewer than 6 months.

 

What will the future hold?

It is expected going forward that any arrears will be ring-fenced where they have accrued as a direct result of the pandemic.

The government also intends to introduce legislation to help both landlords and tenants to come to an agreement regarding vast rental arrears through a new “binding” arbitration process. It has not yet known how this process is to work. There is an opening suggestion that tenants will be encouraged to prioritise payment of new/future sums of rent whilst having an extended form of protection against landlord action to recover the ring-fenced pandemic arrears.

 

How Beeston Shenton Can Help

We have a wealth of knowledge and expertise in debt recovery steps to aid your business.

We provide a considered approach to speed up debt recovery collections whilst minimising customer conflict and reducing the risk to your business.  

Our service is tailored to match the individual needs of your business and pride ourselves in offering bespoke, cost-effective solutions to your debt recovery needs – from simply chasing late payers to legal proceedings including all county court and insolvency processes.  

We are totally dedicated to helping our clients improve cash flow and increase the profitability of their businesses and we use the latest in Debt Recovery software enabling us to process both pre-legal and legal collections promptly and efficiently.

 

About the author

Iain Bould is the head of our Commercial Litigation department.

Iain has over 28 years of experience in Commercial Debt Recovery having worked in both Private Practice and Industry and brings a pragmatic and commercial approach to recovering debts. With extensive experience working across all industry sectors, Iain has particular expertise in working with Insolvency Practitioners in advising and recovering outstanding insolvent company ledgers.

If you need any advice or further information please contact Iain at iain.bould@beestonshenton.co.uk