The Latest on Rent Recovery and Eviction for Commercial Landlords
As we approach the December quarter day, the Government has announced extended measures in the light of the ongoing COVID-19 pandemic to protect tenants in commercial properties.
Forfeiture of Commercial Leases
Section 82 of the Coronavirus Act 2020 now prevents any forfeiture of commercial leases until 31st March 2021 (extended from 31st December 2020) whether by court proceedings or peaceable re-entry, of the vast majority of commercial leases for non-payment of any sums due under those leases. Those sums do however remain due from tenants and only an express waiver will waive the right for landlords to forfeit the lease based on those sums due, once the restricted period comes to an end.
The Act, however, does not prevent forfeiture of a commercial lease on grounds other than the non-payment of rent. If a landlord has a right of forfeiture on other grounds, this right could still be exercised by way of either peaceable re-entry (where this is possible) or by commencing court proceedings for forfeiture for breaches other than failure to pay sums due under the lease. Landlords should be aware that they would first need to serve a notice on the tenant pursuant to Section 146 of the Law of Property Act 1925. That notice must give the tenant a reasonable amount of time to remedy the breach, if they are capable of doing so. If the breach remains after that period has elapsed, then the landlord is entitled to apply forfeit the lease.
Commercial Rent Arrears Recovery (CRAR)
The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 previously prevented landlords from using CRAR unless an amount of at least 90 days’ rent was due (pre – COVID-19 this had been seven days or more). This was subsequently increased to at least 276 days of rent and will increase again to 366 days of rent from 25th December 2020. This restriction now applies until 31 March 2021.
Statutory Demands and Winding Up Petitions
The Corporate Insolvency and Governance Act prevents the presentation of a winding up petition based on an unsatisfied statutory demand served between 1st March 2020 and 31st March 2021. It is also not possible under the Act to present a winding up petition until 31st March 2021, unless it can be shown that COVID-19 has not worsened the debtor’s financial position. This is likely to be difficult for landlords to prove conclusively unless it can be clearly shown there were debts which pre-date the coronavirus pandemic.
Statutory demands can still be served but no winding up petition can now be presented for failure to make payment of sums demanded before 31st March 2021.
Further information is available here – https://www.gov.uk/government/news/business-evictions-ban-extended-until-march.
If you are a landlord seeking clarification in respect of a commercial property, please contact us for an initial consultation or further advice.
Author Gemma Leppard is head of our dispute resolution department and can be contacted on 02085054777.